New-home sales rise on price cuts; mortgage applications fall
New-home sales rise on price cuts; mortgage applications fall
Copyright © 2006, Chicago Tribune and Bloomberg News
Published September 28, 2006
WASHINGTON -- Pricing cuts by builders spurred an unexpected increase in new-home sales last month, but mortgage applications last week recorded their largest drop since July, according to two reports released Wednesday.
The Commerce Department said new-home sales rose in August from a three-year low, though the median price fell for the first time since 2003. Purchases of new homes increased 4.1 percent, the biggest rise since March, to an annual pace of 1.05 million. Economists expected a 3 percent drop.
But sales of new homes were down 17.4 percent compared with August 2005, and the median price of $237,000 last month fell below the median of $240,100 in the same month last year.
About 44 percent of home builders have reduced prices, says Gopal Ahluwalia, director of research at the National Association of Home Builders, citing a survey he conducted this month. More than half of builders are offering free upgrades, up from 37 percent a year earlier, he said.
"The housing market is still in correction mode, but home sales aren't plummeting and it's an orderly correction," said Mike Moran, chief economist at Daiwa Securities America Inc. "We're starting to see inventories stabilize, but they're still at elevated levels, and builders will need to work those off for a while."
Inventories slipped 0.3 percent. There were 568,000 new homes for sale at the end of August, down from 570,000 in July. The number of unsold homes fell to a 6.6-month supply, the first drop since March, from a 7-month supply in July.
The increase in new-home purchases followed a report Monday that showed sales of existing homes fell last month to the lowest annual pace since January 2004.
Some economists consider new-home sales a better leading indicator of the state of the market than resales. New-home sales are recorded when a contract is signed; purchases of existing homes are calculated when the sale is closed, usually a month or two later.
Purchases rose 21.7 percent in the Northeast, 12.2 percent in the Midwest and 11.1 percent in the South. They fell 17.7 percent in the West.
Also Wednesday, the Mortgage Bankers Association said mortgage applications fell 4.9 percent last week. The group's gauge of purchases slumped 5.5 percent. Both are the biggest drops since the week ended July 14. The refinancing index slid 4.1 percent.
"It is not clear that the home-building downturn has yet found a floor," said Stuart Miller, chief executive of Lennar Corp., the nation's third-biggest builder by market value.
Copyright © 2006, Chicago Tribune and Bloomberg News
Published September 28, 2006
WASHINGTON -- Pricing cuts by builders spurred an unexpected increase in new-home sales last month, but mortgage applications last week recorded their largest drop since July, according to two reports released Wednesday.
The Commerce Department said new-home sales rose in August from a three-year low, though the median price fell for the first time since 2003. Purchases of new homes increased 4.1 percent, the biggest rise since March, to an annual pace of 1.05 million. Economists expected a 3 percent drop.
But sales of new homes were down 17.4 percent compared with August 2005, and the median price of $237,000 last month fell below the median of $240,100 in the same month last year.
About 44 percent of home builders have reduced prices, says Gopal Ahluwalia, director of research at the National Association of Home Builders, citing a survey he conducted this month. More than half of builders are offering free upgrades, up from 37 percent a year earlier, he said.
"The housing market is still in correction mode, but home sales aren't plummeting and it's an orderly correction," said Mike Moran, chief economist at Daiwa Securities America Inc. "We're starting to see inventories stabilize, but they're still at elevated levels, and builders will need to work those off for a while."
Inventories slipped 0.3 percent. There were 568,000 new homes for sale at the end of August, down from 570,000 in July. The number of unsold homes fell to a 6.6-month supply, the first drop since March, from a 7-month supply in July.
The increase in new-home purchases followed a report Monday that showed sales of existing homes fell last month to the lowest annual pace since January 2004.
Some economists consider new-home sales a better leading indicator of the state of the market than resales. New-home sales are recorded when a contract is signed; purchases of existing homes are calculated when the sale is closed, usually a month or two later.
Purchases rose 21.7 percent in the Northeast, 12.2 percent in the Midwest and 11.1 percent in the South. They fell 17.7 percent in the West.
Also Wednesday, the Mortgage Bankers Association said mortgage applications fell 4.9 percent last week. The group's gauge of purchases slumped 5.5 percent. Both are the biggest drops since the week ended July 14. The refinancing index slid 4.1 percent.
"It is not clear that the home-building downturn has yet found a floor," said Stuart Miller, chief executive of Lennar Corp., the nation's third-biggest builder by market value.
posted by Carlos T Mock @ 9:28 AM
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