Another day, another positive report for housing. The Census Bureau reports rising New Home Sales nationwide -- one day after the National Association of REALTORS® did the same for Existing Home Sales. The housing recovery remains on course.
New Home Supplies SinkingThe number of new homes sold rose to 343,000 on a seasonally-adjusted, annualized basis in April -- a 3.3 percent jump from March and a 10% improvement from one year ago.
Excepting February 2012, April's figures marks the second-highest tally for New Home Sales since the end of the 2010 federal home buyer tax credit. It's also the seventh out of the last 8 months during which sales for newly-built homes increased.
During that time, the supply of new homes for sale has dropped 13% to 146,000 homes nationwide. At the current pace of sales, the nation's complete new home inventory would be sold in 5.1 months.
A 6-month supply is believed to indicate a market in balance. Anything less than 6 months suggests a bull market for housing; a market in which sellers have negotiation leverage over buyers.
In the "new construction" market, this leverage is especially important.
As compared to a home resale, new homes are specifically sold by builders to individual buyers -- first-time buyers and move-up buyers alike. Builders are less likely to offer deep discounts and/or free upgrade when market conditions favor sellers, and when homes are in high demand.
Consistent with the New Home Sales data, home builders report buyer foot traffic to be at its highest levels since 2007.
Low Mortgage Rates, Stimulus Boost Home SalesNew home sales have been boosted by an improving economy and sagging mortgage rates. The economy has put more people back to work, and boosted consumer confidence. Falling mortgage rates have helped, too.
Freddie Mac reports this week's average, 30-day fixed rate mortgage rate at 3.78% nationwide with and accompanying 0.8 discount points. As compared to one year ago, that's an improvement of 0.86 percent.
As a real-life example, assuming a mortgage at the conforming loan limit of $417,000, today's mortgage payments are $210 less.
- May 2011 : $2,148 monthly payment (principal + interest only)
- May 2012 : $1,938 monthly payment (principal + interest only)
Low rates and the availability of low-downpayment mortgage program such as the FHA's 3.5% downpayment program; the VA 100% financing program; the USDA 100% financing program; and Fannie Mae and Freddie Mac's 5% downpayments should help keep home demand high through the spring and summer months.
Buying New Construction? Good "Deals" DisappearingIf you're in the market for new construction and newly-built homes, consider that rising demand and shrinking supply result in higher prices. If you're looking for a deal, the best values may be the one you find today.
See today's mortgage rates and build your housing budget. Low-downpayment or 20% downpayment, it helps to know your options.