November 25th, 2009 by Michael Oliver

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New home sales increased last month to a level not seen in over a year as demand in the southern portion of the US increased dramatically. The commerce department stated the new home sales rates increased 6.2% to a seasonally adjusted annual rate of 430,000 homes from an upwardly revised 405,000 pace in September. On a note for those that don’t follow these reports as close as I do a seasonally adjusted annual rate of anything less than 500,000 new homes per year is considered anemic. During the real estate boom new home sale levels reached at high as over 2,000,000 homes per year.  To be at a rate of 430,000 homes shows the high rate of overhang in the existing markets as foreclosures and distress sales pull buyers their direction and away from new homes due to the value most of these homes can be purchased for.

In Tucson, the new home builders have in my mind successfully scaled back their businesses to deal with the lag in demand. Many homebuilders in Tucson are still losing money just to stay in business and/or just breaking even. After the past three years of continued decline in new home prices and sales all of the builders that were financially unstable are out of business never to return. Even some of the largest builders in America felt the need to merge to save costs to allow them to try to make a profit in the hardest new home building conditions in at least over 75 years!

In the rest of the new home sales report that came out today it highlights the stats of the new housing industry they are as follows:

-There were 239,000 new homes for sale at the end of October, down 4.4 percent from September and the lowest inventory level in nearly four decades.

-At the current sales pace, that represents 6.7 months of supply, down from last winter’s peak of more than a year.

-Separately, rates on 30-year mortgages dropped in the past week to match a record low set in April, while the 15-year home loan rate fell to a new all-time low, home funding company Freddie Mac said on Wednesday.

-Despite the lack of certainty about the tax credit that buyers faced in October, sales were up 5.1 percent from a year ago, the first yearly increase since November 2005.

-The surge in sales was driven entirely by a 23 percent increase in the South. Sales fell about 5 percent in the West and Northeast, and fell 20 percent in the Midwest.

-The median sales price of $212,200 was almost even with $213,200 a year earlier, but up almost 1 percent from September’s level of $270,000.

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