Are New Home Prices, Starts and Sales Rates Nearing Bottom?
RISMEDIA, August 19, 2009-According to John Burns Real Estate Consulting’s August 2009 survey of new home builders, housing market stability is just around the corner.
“While conditions vary by region and location, we are almost at a point where the majority of our respondents indicate that the housing market has stabilized,” said Jody Kahn, vice president of Irvine, Calif.-based John Burns Real Estate Consulting.
This month’s sample consists of 292 home building industry executives from public and private companies. In total, their insight is reflective of on-the-ground conditions in 89 MSAs and 1,857 communities.
-Price stability emerged in most areas of TX, CA and the Northeast, with FL and the Midwest close behind. The Northwest, Southeast, Southwest and outlying areas in all submarkets continue to struggle.
-Sales per community have not changed much for several months.
-Starts are increasing in 7 of the 10 regions.
The survey also shows that Federal intervention is having a positive impact on the housing market. “The phrase ‘tax credit’ dominates in the verbatim comments we got from builders,” said CEO John Burns. “We continue to expect improving conditions for the next several months as the November 30 tax credit deadline approaches.”
New home pricing net of incentives is almost flat nationally. California, Texas and the Northeast (including Washington D.C.) report flat prices, with as many locations now raising prices or eliminating incentives as are continuing to drop prices. The number of builders dropping prices only slightly outweighs those raising prices in the Midwest and Florida. The Northwest, Southeast (Carolinas and Georgia) and Southwest are the notable exceptions, where prices continue to fall. In almost all markets, the lower price points are faring better than the higher price points due to FHA financing and the Federal tax credit.
Ratings of current sales and expected sales rose slightly, while the traffic rating was flat from July 2009. While sales remain very low, builders reported that sales have improved month-over-month 6 of the last 7 months. The Southern California and Northeast regions posted notable gains in ratings of current sales and traffic, while Northern California’s ratings declined. Notably, numerous California builders reported a distinct falloff in sales following the end of the State tax credit in early July.
Starts increased in 7 of the 10 regions of the country. The largest increases month-over month are in the Northeast (+41%) and Southern Florida (+31%), and the largest decreases are in the Northwest (-22%) and Northern California (-21%). One reason for increased starts is the lack of inventory. Unsold finished inventory has now declined to 3.2 homes per community.
Direct home and site construction costs are down 11-15% from peak. The results vary widely by builder, with 14% reporting cost reductions in excess of 25% and 5% reporting no cost reductions at all.
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