New home sales are increasing because of the price discounting on more expensive homes (in the bubble markets) and large incentives being offered by homebuilders. These incentives include decorating and landscaping allowances, loan points/closing costs paid, and gift certificates
U.S. new home sales rose 4.9% in April to 1.20 million units, the second straight monthly increase and the highest level of the year, the Commerce Department estimated Wednesday. The rise was unexpected. Economists expected sales to fall to 1.15 million given the general weakness in the housing market. The inventory of unsold homes on the market rose by 2.4% to 565,000, representing a 5.8-month supply at the April sales pace, down from 6.0 in March. The median price of a new sold home rose 2.8% in April to $238,500 from the previous month. Median prices are up just 0.9% in the past year.
Price discounts on homes in the bubble markets have brought some new home buyers to the table [this hardly affects the median price much because in most bubble markets the vast majority of new homes are priced well above the median]. This has TEMPORARILY increased the number of new homes sold (the longterm trend is down). Furthermore, new home sales are also taking sales 'away' from existing home sales.
[These initial US Commerce New Home Sales numbers are subject to large errors. The Commerce Department writes "Since a “sale” is defined as a deposit taken or sales agreement signed, this can occur prior to a permit being issued]
Calculated Risk says "I expect April sales to be revised down too. This report shows that the housing market continues to slow down."
From the Commerce Department PDF; US New Home Inventory. (Ben Jones' Housing Blog)
4.04..383,000
4.05..445,000
4.06..565,000
The year over year increase in unsold new homes was a full 27%. Meanwhile, home sales are down 5.7% compared to April 2005.. The April New Homes Sales report does not contradict the reality of a steadily declining housing market.
Posts
Assuming your conclusion is correct (higher than expected sales of new homes are the result of discounting/incentives), I'd say that was evidence that there will not be a large market decline. There are clearly potential buyers out there who are willing to enter the market with the right incentives. This suggests that prices don't need to fall much in order to establish a new equilibrium between buyers and sellers.
ReplyDeletemose,
ReplyDelete"There are clearly potential buyers out there who are willing to enter the market with the right incentives."
True. Not enough. Once the memo is totally out there that prices are falling and will continue to fall for many years there will be even less buyers.
David said
ReplyDelete"New home sales are increasing because of the price discounting on more expensive homes (in the bubble markets) and large incentives being offered by homebuilders. These incentives include decorating and landscaping allowances, loan points/closing costs paid, and gift certificates"
I think you are missing one important point....this is new sales NATIONWIDE! I don't believe that the housing bubble exsist nationwide (I'm certain that it does not exsist the the Hampton Roads Virginia area). I'm sure the decreases in the Washington DC, Florida, California and other bubblicous areas are more the offseted by the nation as a whole. Nationwide employment prospects and the overall has continued to improve.
Bottom line....I believe your overall premises applies in certain areas but not nationwide.
Didn't anyone notice that the only reason there was an "increase" this month was that they revised last month DOWN by 71 thousand?
ReplyDeleteWVU,
ReplyDeleteWhy do you think the Hampton Roads area is NOT a bubble area? The market there has been VERY flat, home prices exploded over the last few years, and the incomes in that region are very low. Certainly the loss of the Ford plant won't help any ...
"Why do you think the Hampton Roads area is NOT a bubble area? The market there has been VERY flat, home prices exploded over the last few years, and the incomes in that region are very low. Certainly the loss of the Ford plant won't help any ..."
ReplyDeleteYes there has been price increases there but I would not say call it explosion (with the exception of the Ghent area). Hampton Roads has been growing over the years. People who buy homes in Hampton Roads intend to live in those homes (no flippers with the exception of the aquarium in Virginia Beach). I don't see the Ford plant closure having a hugh impact on the overall Hampton Roads economy. Closing Oceana however would be a big deal. I still don't see how anyone would call Hampton Roads bubblicous.
home sales are up so the Fed will keep raising rates... more carnage.
ReplyDeleteHello
ReplyDeleteWhy does zipreality list houses as sold for $10.00?
Thx
This comment has been removed by a blog administrator.
ReplyDeleteNikki said...
ReplyDeleteWell, I always knew the Baltimore Sun was a shill for the MAR, but today's headline about the new home sales numbers sealed the deal. See my blog for the links, but they took the AP story that all day had been headlined "April new homes sales up 4.9 percent in Apr." and made it "Sales of new homes soar in April". Google it--the Sun is the only place where that's the headline.
I think it's funny that you choose to emphasize that this data is subject to large errors. If the new was "New Home Sales Plunge" you would have overlooked the large errors part.
ReplyDelete-joe06
Dammit--baltimorehousing.blogspot.com
ReplyDeletejoe06-
ReplyDeleteThe point is that is new home sales plunged, the headline wouldn't say that--it would say New Homes sales Ease, or New Home sales cool. That's the game.
Haha, David deleted my post in which I pointed out that he gives tortured explanations for every piece of data that doesn't support his preferred conclusions. Nice blog.
ReplyDelete" Anonymous said...
ReplyDeleteHello
Why does zipreality list houses as sold for $10.00?
"
David does that so he can say the bubble is bursting.
The number of new homes sold is less that the original number of homes sold last month (before revisions this month) . . . therefore, it seems to me that homes sold didn't rise 4.9%, but once the new numbers are out, will drop below last month's revised numbers.
ReplyDeleteThat's not tortured logic. It's not David's fault or anyone else posting on housing right now that the numbers are revised every month (downwards) which creates the appearence of a surge in house purchasing.
"The number of new homes sold is less that the original number of homes sold last month (before revisions this month) . . . therefore, it seems to me that homes sold didn't rise 4.9%, but once the new numbers are out, will drop below last month's revised numbers.
ReplyDelete"
The number hasn't been revised - that's just a blogger's wishful thinking. Sorry the housing market had good news today. I know it upsets you.
"
ReplyDeleteCalculated Risk says "I expect April sales to be revised down too.""
He doesn't say why he expects that. I hope he doesn't slit his wrists if that doesn't happen.
Anonymous said...
ReplyDelete…”The number hasn't been revised - that's just a blogger's wishful thinking. Sorry the housing market had good news today. I know it upsets you. ……”
OK, ever think you should read the report before posting? As per the report, the numbers are revised.
“This is 4.9 percent (±11.5%)* above the revised March rate of 1,142,000, but is 5.7 percent (±9.8%)* below the revised April 2005 estimate of 1,270,000.”
And if I understand correctly, the margin of error for the data is greater than the change (up OR down). It could be an increase as high as 16.4% or, a decrease as low as -6.6%. With current inventory levels, which do you think (hope) it is?
Hey, do you have some Fanne Mae stock you need to unload?
"OK, ever think you should read the report before posting? As per the report, the numbers are revised.
ReplyDelete"
The APRIL number has not been revised. Please try to follow along. You HOPE the number is revised down (for some reason), but there is absolutely no reason to suspect that it wil be - and "Calculated Risk" doesn't give any.
Anonymous said...
ReplyDelete“The APRIL number has not been revised. Please try to follow along. You HOPE the number is revised down (for some reason), but there is absolutely no reason to suspect that it wil be - and "Calculated Risk" doesn't give any.”
Ok anon, I gave you the benefit of the doubt and re-read the report and once again I quote:
““This is 4.9 percent (±11.5%)* above the revised March rate of 1,142,000, but is 5.7 percent (±9.8%)* below the revised April 2005 estimate of 1,270,000.”
So the report says “revised” but it does not mean “revised”? Please explain…..hold on, unless you’re going to try to explain what the meaning of “is” is.
But let’s keep going……
“but there is absolutely no reason to suspect that it wil be - and "Calculated Risk" doesn't give any.”
Let’s get this straight. Numbers aren’t fudged? Figures skewed? Unscrupulous acts by anyone in real estate? NO?
Then I suggest you just sit on that Fannie Mae stock you have, after all, no one in real estate would lie about the numbers. Real estate only goes Up! Up! Up!
Here anon, if you must be spoon feed:
ReplyDeletehttp://abcnews.go.com/Business/story?id=1998847
Actually, Fannie Mae stock is a decent value now since the scandal and the penalties haev been priced into the stock, and the company's earnings prospects are still quite good.
ReplyDelete"Here anon, if you must be spoon feed:
ReplyDeletehttp://abcnews.go.com/Business/story?id=1998847 "
Do you not understand the difference between "March" and "April"? These are 2 different months. If you do not know this, you should not leave the house, whether you own or rent, Robert.
"Anonymous said...
ReplyDeleteDo you not understand the difference between "March" and "April"? These are 2 different months. If you do not know this, you should not leave the house, whether you own or rent, Robert.”
So you did go with the what “is” is.
Yes, two different months (revised March rate/revised April 2005 estimate)
and as per the report, both were revised.
MIRS data comes out on the 10th for the previous month.
If you don't understand that, you should not step out of your whale, whether you’re underwater on your loan or HELOC’ed your way to a new SUV,anon
Robert, we are talking about April 2006. It has not been revised. It may be revised, but that hasn't happened yet. Please, please, please try to follow along.
ReplyDelete“Anonymous said...
ReplyDeleteRobert, we are talking about April 2006. It has not been revised. It may be revised, but that hasn't happened yet. Please, please, please try to follow along. “
Anon, you may be talking about 2006, but as I posted earlier (in bold) revised March /revised April 2005 estimate
Please, please, pretty please, continue paying minimums on your I/O loan.
It matters not what month you’re talking about. The substance of a previous post is questioning why the numbers need to be “revised”.
The numbers come out like clockwork on the 10th; “how many homes on the market, how many sold”. Simple as that. What’s the problem? You don’t like the numbers so you “revise” them? That makes things convenient. “Gee Bob, looks like we didn’t see the increase we were hoping to see” “No problem, just revise the numbers”.
Fine, if that's your point, robert, terrific. It's not relevant to this discussion, but the numbers in March were revised, most likely in an attempt top make them correct.
ReplyDeleteIf you simply disbelieve the numbers, then why are you interested in this thread at all?
Anonymous said...
ReplyDeleteFine, if that's your point, robert, terrific. It's not relevant to this discussion, but the numbers in March were revised, most likely in an attempt top make them correct.
If you simply disbelieve the numbers, then why are you interested in this thread at all? “
How is changing the data not relevant? I think that the market is based “on the numbers” and if those can be change at a whim, I would think that would skew the market. Don’t you think?
I don’t disbelieve the numbers, I question them.
"How is changing the data not relevant? I think that the market is based “on the numbers” and if those can be change at a whim, I would think that would skew the market. Don’t you think?"
ReplyDeleteAll government releases like this are subject to revision - you see it all the time in labor statistics, population statistics, economic statistics, crime statistics etc. because in order to timely report to the public, they have to rely on estimates. Sometimes they are revised in a positive way, sometimes they are revised in a negative way.
Either way, it doesn't change the fact that you obviously weren't reading carefully when you responded. We were talking about certain posters' wishful thinking that the positive April housing news would be revised down. maybe it will, maybe it won't. But the fact that government numbers are subject to revision doesn't, by itself, imply that anything insideous is going on.
If the stats are revised UP will you slit your wrists?
Anon,
ReplyDeleteI have nothing but a little time invested in real estate. But for some reason, you have come full circle and have no problem suggesting suicide. Maybe you should just foreclose now and get some help.
Maybe start a troll support group?