Business

New home sales up, but sales remain slow

Posted July 26, 2010 10:07 a.m. EDT
Updated July 26, 2010 6:57 p.m. EDT

— Sales of new homes jumped last month compared with May, but it was the second-weakest month on record. The lackluster economy has made potential buyers skittish about shopping for homes.

New home sales rose nearly 24 percent in June to a seasonally adjusted annual sales pace of 330,000, the Commerce Department said Monday. May's number was revised downward to a rate of 267,000, the slowest pace on record dating to 1963. Sales for April and March were also revised downward.

In North Carolina, sales of new homes rose only 4 percent from May, but sales were up 17 percent over June 2009. All regions of the state, except for the Outer Banks, Charlotte, Brevard and Hickory posted higher June sales, according to figures from the North Carolina Association of Realtors.

Sales of new and existing homes in the Triangle in June were up 7 percent from May and 21 percent from a year ago. In both Fayetteville and Pinehurst, new home sales rose 9 percent from May, and sales jumped by 15 percent in Rocky Mount and skyrocketed by 45 percent in Goldsboro.

High unemployment, low job growth, and tight credit have kept people from buying homes. The industry received a boost this spring when the government offered tax credits to homebuyers. But since they expired in April, the number of people looking to buy has dropped, even with the lowest mortgage rates in decades available.

"There's no question that this is a weak number, but it seems to be more stable," said Stuart Hoffman, chief economist at PNC Financial Services Group. "The bottom line to all of this is that we need more jobs."

Sales are down 72 percent from their peak annual rate of 1.39 million in July 2005. More than 600,000 new homes were sold annually from 1983 through 2007. After the housing bubble popped, sales plunged to 375,000 last year. That was the weakest yearly total on record.

New homes sales made up about 7 percent of the housing market last year. That's down from about 15 percent before the bust.

Home sale prices appear to have stabilized in North Carolina, with the average sales price in June up 1 percent from a year ago. Total sales volume, in dollars, was up 9 percent from May and 17 percent from June 2009.

In the Triangle, the average home sold for almost $240,700 in June. Statewide, the average sale price was $212,600.

"The sales in this community have been increasing, as well as the traffic we see for potential buyers," said Rex Osborne, who represents York Simpson Underwood Realty in the Villages of Apex development.

Osborne said three houses have been purchased in the development in the last 10 days. He said buyers want reasonably priced homes with modern amenities.

"It's possibly that the home is smaller than they're used to, more efficient than what they're used to," he said.

Devorah Ungerleider-Moore said she and her family moved from California to Apex four months ago, and they couldn't believe what they got for their money in the Triangle housing market.

"Once our son is asleep, we're sitting down in the living room, and we look around and say, 'Is this really ours?'" she said.

Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, according to the National Association of Home Builders. The impact is felt across multiple industries.

Builders have sharply scaled back construction in the face of a severe housing market bust. The number of new homes up for sale nationwide in March fell 1.4 percent to 210,000, the lowest level in nearly 42 years.

Due to the sluggish sales pace, it would take eight months to exhaust that supply. That's above a healthy level of about six months.

Molli Bot said she and her husband put a relatively low sale price on her house, at 200 Sylvan Grove Drive in Cary's Lochmere neighborhood, because more than 50 other homes in the subdivision also are on the market.

"We've done everything that needs to be done. It's move-in condition," said Bot, who is selling the house herself. "We're confident that the house will sell. It's real pretty inside, real pretty outside, a great neighborhood. Everybody knows this neighborhood."

The median sales price on new homes nationwide in June was $213,400. That was down 0.6 percent from a year earlier and down 1.4 percent from May.

New home sales rose by 46 percent in the Northeast, 33 percent in the South and 21 percent in the Midwest. The West posted a decline of nearly 7 percent.

"One month doesn't make a trend and the roadblocks to a healthy housing market are high, the most important one being the still-high jobless rate," wrote BMO Capital Markets economist Jennifer Lee in a note to clients. "But with borrowing costs at record lows, prices also remaining low, those with jobs who can afford a home may be enticed."