Housing Market continues to slow
March 2006
Latest data indicates that the housing market continues to slow, however some maintain that this will not lead to a total collapse.
The Department of Commerce reported that sales of new, single family homes fell 5 percent in January, the fourth such fall in seven months. The inventory of unsold homes rose to 5.2 months supply, the highest since 1996. It took a median 4.5 months to sell a new home in January which was a new high.
New home sales fell across three regions in January, down 14.9 percent in the Northeast, 10.8 percent in the Midwest and 10.3 percent in the South. Sales rose 11.3 percent in the West.
In response to the changing conditions some builders are are offering more sales incentives to entice buyers, while Centex is even cutting prices in some areas. David Pressly, President of the National Association of Home Builders (NAHB) said that "After a record-setting sales pace in 2005, home builders are seeing an orderly cooling-down process as the supply-demand balance shifts and buyers gain more leverage."
NAHB Chief Economist David Seiders played down the importance of the new high in unsold inventory. "With sales volume off, the inventory level has edged higher, but this rise is nothing to be alarmed about because the fastest growing component of the inventory run-up relates to homes that have been permitted but not yet been started, which jumped 60 percent from this time last year."
Seiders also dismissed the idea that mild January weather had any role in the report claiming that "any inference that sales numbers were actually weaker than they appeared because the weather was so good just does not hold water.”
The NAHB expects the market in new homes to continue slowing during the rest of the year. "NAHB’s forecast continues to anticipate a decline of roughly 7 percent in new-home sales for 2006 as a whole, essentially returning to the healthy 2004 level," said Seiders.
The National Association of Realtors (NAR) reported a 2.5 percent decline in total existing home sales. This was 5.2 percent below the level in January 2005. Their Chief Economist, David Learah, said the Pending Home Sales Index had been trending down since August.
"In the wake of interest rates peaking in November, I expect we are in a bit of a trough that may be followed by a modest rise and then a general plateau in the level of sales activity. Existing home sales should stay below the record levels experienced over the last two years, but they’ll maintain a historically high pace." he said.
Existing home prices were up 11.5 percent over January last year which NAR believes are the result of long-term effects of tight supply. There was a rise of 2.4 percent in total housing inventory levels, equivalent to 5.3 months supply. "Although housing inventory levels have been improving, it is far from being a buyer’s market in most of the country and we see the momentum of double-digit appreciation being sustained in home prices" said NAR President Thomas M. Stevens.
There was a fall of 1.5 percent in single family home sales since December, this was 4.8 percent lower than Jan 2005. Sales fell in three regions compare with January 2005 : in the West by 14.4 percent, the Northeast by 13.2 percent and in the Midwest by 3.4 percent. Sales rose by 1.9 percent in the South compared with January last year.
Overall the median existing single-family home price was $210,500 in January, up 13.1 percent from a year earlier. Prices were up in all regions from january 2005: in the Midwest by 12.1 percent, in the West by 11.5 percent, in the Northeast by 9.5 percent and in the South by 5.3 percent
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