New home market strengthens further

The new home market showed further strength in October as new home sales rose 1.7% to an annual rate of 728,000 homes. Inventory remained high with enough homes on the market to cover 8.5 months of new home sales, but new residential construction dropped 2%.

The median sales price for new homes was lower at $217,800. Some of this drop was due to builders getting aggressive with pricing, but much of it was also due to weakness in the upper end of the market. Problems in the jumbo loan market caused problems for new and existing homes where the loan amounts were above conventional loan limits ($417,000 except Alaska, Guam, Hawaii, and U.S. Virgin Islands where the limit is $625,500). Less sales of higher priced homes, drops the median and average sales prices even if the market of lower priced homes is stable. Of course some of this may mean drops in prices for homes just outside the range for conventional loans and could depress prices further down the scale, but the big news in this week’s reports was strength in new home sales and some tightening on the inventory side.

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source: tom-hanna.com