New-Home Sales Drop
New-Home Sales
The Commerce Department reported today new-home sales fell 11.5% in September to the lowest level in the last 10 months. to compound this, bad news, the report also stated thatthe August new home sales were revised down by 22,000.
Even with this drop in September new home sales, the year-over-year new home sales pace was actually up by 2%!a number of housing market insiders attribute the September drop in new home sales to the increasing home prices. In many markets home prices are far exceeding the ability for the average new home buyer to qualify for conventional mortgage.
In today’s economy the housing market has been one of the stellar improving sectors. Now, some economists are forecasting a growth slowdown in the third quarter as higher new home prices and tough mortgage criteria added major impact.
New Home sales are very different in terms of price trends compared to existing homes. New Homes are mainly sold by builders who want a very large Rate of Return in a short period of time. Often times the price is not justified based on quality of construction.
On the flip side, the existing home inventory is a lot tighter but still people find relative value in paying up for a good old house in a nice neighborhood than going to a builder and being ripped off.
Secondly, the Fed is in large part to blame for the Housing bubble which is worse than what was built up during 2006 and 07′. The fed had a golden opportunity to modestly raise rates in 2012 and 13′. Its nearing 2016 and we are in a Zero rate environment.
MLS San Diego California
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