New Home Sales Have Big Expectations - 2013 looks as if it'll be a bright year for new home builders. Sales of new homes were up in the fourth quarter of 2012, and experts anticipate similar increases in the months to come.
There was plenty of encouraging news in the latest housing data released by the U.S. Census Bureau and Department of Housing and Urban Development. According to the report, sales of new single-family homes rose to a seasonally adjusted rate of 377,000 in November, up 4.4% from October and 15.3% above the November 2011 estimate.
So, let’s go inside the numbers…
The number of new homes that were sold in November wasn't the only thing on the rise. The median sale price and the average sale price for the month both increased on a month-by-month and year-by-year comparison. According to the data, the median sale price for new homes sold in November was $246,200. That's up from $237,500 in October, and it’s a 13% increase from November 2011, when the median sale price was $214,300. The average sale price of new homes in November posted similar gains. The Census Bureau reports that number is now at $299,700, up from the seasonally adjusted $272,200 in October. In the same month of 2011, the average sale price for new homes was $250,000, meaning that from November-to-November, the market saw a 16.6% increase.
The report breaks down the country into four regions (South, Northeast, Midwest, and West), and only the Midwest suffered a year-to-year decline in the number of new home sales, falling 5.8% from a year ago. So, in simple terms, new home sales are up across most of the nation. The December numbers won't be released by the Census Bureau until January 25th. So, we won't have complete statistics for 2012 until that date, but economists say the November numbers tell us all we need to know about the future of new home sales.
What does it mean for you?
Anytime there's a growth in home sales – existing or new – it shows that consumers have more confidence in the economy and the housing market. Buying a home is a huge investment, and consumers apprehensive to make a purchase if they think its value will decrease. In recent years, home prices have been on the decline, and consequently, so has the number of new homes being sold.Investors started stocking up on foreclosures and short sales, hoping to flip the home and sell it for a profit when the economy recovered.
But now that the housing market is starting to recover, different buyers are in the mix. Because they are purchasing homes to live in, and not for investment purposes, sales of new homes are on the rise. The increase shows that consumers as a whole are encouraged by the recent improvements in the economy and housing markets. And the more new homes that sell, the more likely it is that the economy will eventually make a full recovery.
As builders see that more of their projects are selling, they will begin construction on more new homes. That means more jobs for sub-contractors and laborers. It also means more sales for building supply companies, who sell the products needed to build a home. Newer and nicer homes means the property value of existing homes in the surrounding neighborhoods also go up. And as home values increase, fewer borrowers are underwater on their loans. Plus, as the value of their homes gets closer to the price they originally paid for it, more homeowners are likely to list their homes for sale. This adds more inventory and variety to the market, giving prospective buyers more options when searching to buy. In other words, it's all a cycle, so an increase in new home sales is always a good thing for the housing market! If the projected statistics for 2013 are correct, we could see the housing market and the economy recover quicker than expected.
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