If you think housing news is full of nothing but doom and gloom these days, think again. There’s actually some GOOD news on the housing front – new home sales hit a two-year high in September!
And, don’t worry, this isn’t one of those fraction-of-a-percent increases that doesn’t seem like a whole lot to get excited about. Instead, the number of brand new homes sold around the country went up 5.7% when compared to August. Even better, they went up a whopping 27% since September 2011.
Want some more good news? The median price of those homes went up, too – all the way to $242,400. That’s almost 12% higher than it was this time last year!
In fact, the sales numbers are the highest they have been since April 2010. And, back then, sales were up because people were taking advantage of the homebuyer tax credits that were about to expire.
This time around, though, there’s no tax break to spring people into action. So, what’s behind the increase?
- Low interest rates
This reason shouldn’t come as much of a surprise though, as mortgage rates have been hovering at or right above record lows all year long.
As was expected, mortgage rates continued to drop in September. In fact, before the end of the month, the average rate on a fixed 30-year mortgage was 3.49% (a record low), and the average rate on a fixed 15-year mortgage was all the way down to 2.77% (another record low). When you combine that with the appeal of a shiny, brand new house, it was simply too much for some buyers to turn down!
- Fewer foreclosures
This reason was much more of a surprise than the low mortgage rates!
In the months leading up to September’s better numbers, a majority of the country saw fewer foreclosures. Specifically, during the third quarter (which runs from July 1st to September 30th), foreclosure activity was down in 62% of U.S. cities. In fact, in some of America’s biggest cities – including Los Angeles, Detroit, San Francisco, Phoenix, and San Diego – foreclosures have dropped more than 25% over the past year.
With fewer bargain-basement foreclosure homes to choose from, buyers had to look at more traditional options. In the end, they wound up buying new homes.
But as encouraging as the September new home sales numbers are, the news isn’t ALL good, though. Despite the increase, the numbers still aren’t as high as experts would like. Back in 2005, 1.5 million new homes were sold. Right now, U.S. homebuyers are on pace to purchase fewer than 400,000 new homes during all of 2012.
One more thing concerning experts? The new home inventory. The supply of new homes actually declined in September (in fact, by the end of the month, there were only 145,000 new homes for sale in the entire country!), which is a sign that construction is not moving forward like it should be. Construction is usually used as a measure of how healthy the economy is perceived to be. Plus, the construction industry provides lots of jobs – so the news that inventory dropped is double the disappointment.
The only positive from the low inventory of new homes? It will make the prices go up. After all, basic supply and demand is going to come into play. As the September numbers show, the demand for these houses is clearly there (or, at the very least, on the rise). If the inventory stays this low, the prices will increase even further – and it will be interesting to see how buyers respond!
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