California New Home Market Feeling the Credit Crunch
October 17, 2007
SACRAMENTO – The pace of home sales at California new-home communities slowed further in August, the California Building Industry Association reported today, prompting calls for Congress to take action to enact reforms that could increase the availability of credit.
The monthly CBIA/Hanley Wood Market Intelligence (HWMI) New Home Sales and Pricing Report showed that new home sales in August were 45 percent below August 2006, sharpening the current trend of decline. For the month, 3,420 homes and condominiums were sold in the subdivisions tracked by Costa Mesa-based HWMI, compared to 6,181 in August 2006. Sales of single family homes dropped by 43 percent, sales of townhomes and “plexes” – duplexes, triplexes, etc. – were down 25 percent and sales of condominiums were down 55 percent.
Compared with the same period last year, the median base home asking price of homes sold dropped by 7.6% percent.
Non-seasonally adjusted total new home sales were 31.5 percent lower than levels seen in July, although August generally sees a slower pace of sales activity than July. Median prices statewide were nearly unchanged compared to July.
Jonathan Dienhart, Director of Published Research for HWMI, said the sharp decrease in sales during August largely reflects the credit problems in the mortgage market.
“The credit crunch couldn’t have come at a worse time,” Dienhart said. “Just when we had started to see signs of stability in some markets, the difficulty in gaining access to credit has made purchasing a new home unattainable for many prospective buyers.”
Robert Rivinius, CBIA’s President and CEO, said the decline was further proof that the U.S. Senate needs to take steps to ease the credit crunch facing homebuyers across the nation.
“The Senate should adopt House-passed legislation that would allow the two government-chartered lenders, Fannie Mae and Freddie Mac, to purchase mortgages in high-cost areas such as California, and changing tax laws to ensure borrowers who have portions of their loans forgiven by lenders aren’t then penalized by the IRS,” Rivinius said.
Dienhart said that not only must the credit situation improve, but consumers need to get their confidence back before the market can stabilize.
“Many prospective home buyers have taken themselves out of the market because it seems too risky, or because they don’t feel they can sell their existing home, or because they do not believe they can qualify for an affordable mortgage,” Dienhart said.
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The California Building Industry Association is a statewide trade association representing more than 7,000 businesses – homebuilders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals. A recent study determined that homebuilding generates approximately $68 billion a year to the California economy and creates an estimated 487,000 jobs statewide. More information is available on the Association's Web site, www.cbia.org.
Hanley Wood Market Intelligence is the housing industry’s leading provider of rich data and consulting services on residential real estate development and new-home construction and is a division of Hanley Wood, LLC, the premier media company serving housing and construction. More information is available on the company’s Web site, www.hanleywood.com/hwmi or by calling 1-800-639-3777.
Hanley Wood Market Intelligence (HWMI) collects data from new for-sale production subdivisions of 10 units or more on a monthly basis. HWMI Net Sales represent sales contracts signed during the period indicated minus any reported cancellations. Median and Average Prices are based upon the minimum asking price of the plans sold during the period and do not include the cost of any lot/view premiums or upgrades. Because this data is collected monthly and based upon sales contracts that represent future closings, HWMI data is the most forward-looking data source available for new home information in the state of California.
