Declining New-Home Sales Emphasizes Need for Action, CBIA Declares
Slumping sales in May point to need for Congress to quickly pass stimulus bill
July 15, 2008
SACRAMENTO – The pace of home sales at California new-home communities was significantly depressed in May, reversing what had been a recent trend of shrinking year-over-year sales declines and prompting the California Building Industry Association to urge Congress to quickly pass pending legislation to stimulate the beleaguered housing market.
The monthly CBIA/Hanley Wood Market Intelligence (HWMI) New Home Sales and Pricing Report showed that new home sales in May were 51 percent below May 2007. The drop represents a worsening in the trend of year-over-year decline, which had shrunk to 44 percent in April after coming in at 49 percent in March.
Robert Rivinius, CBIA’s President and CEO, said the deteriorating housing climate demands quick Congressional action.
“Congress is now debating HR 3221, a major housing stimulus bill that would help ease the foreclosure problem, help stabilize the two federally chartered firms that guarantee most of the nation’s mortgage loans, provide a tax credit to stimulate home sales, and help reduce mortgage rates in high cost states like California,” Rivinius said.
“There is bipartisan consensus that these provisions are needed, but there are major differences between the versions of the bill passed by the House and the Senate. California homebuilders urge Congress to quickly work out their differences and send this bill to the President’s desk.”
During May, 3,064 homes and condominiums were sold in the subdivisions tracked by Costa Mesa-based HWMI, compared to 6,310 in May 2007, and down more than 66 percent from the 9,053 sales reported in May 2006. During May, sales of single-family homes dropped by 44 percent, while sales of townhomes and “plexes” – duplexes, triplexes, etc. – were down 45 percent, and sales of condominiums were down by nearly 74 percent.
Non-seasonally adjusted total new-home sales in May were 5.6 percent lower than levels seen in April, whereas the same month-to-month change a year ago was up by 9 percent. The median price of homes sold compared to last month was nearly unchanged at $375,000.
Jonathan Dienhart, Director of Published Research for HWMI, said the faltering market is likely to face some additional hardship prior to recovery.
“What had appeared to be a slow trend of stabilization in new-home sales activity seems to have fallen apart,” Dienhart said. “With sales continuing to slump, it’s going to make the rest of 2008 a rocky ride for homebuilders.”
He also suggested that foreclosure and bank-owned sales in the existing home market could be partially to blame.
“Bargain hunters are the ones out in the market today, and foreclosure/bank-owned property sales are often where the most substantial discounts can be found. Until we move through more of that inventory, the new-home market will face stiff competition from these below-market-rate offerings.”
After weeks of internal wrangling, the U.S. Senate last week passed HR 3221, known as the Foreclosure Prevention Act of 2008. Senators added several amendments to an earlier version of the bill passed by the House, which Rivinius said could mean the bill will need even more time before it gets final approval from both houses of Congress. The bill as now written would increase the federal conforming loan limits from $417,000 to $625,000, a long-overdue reform that would let many more buyers take advantage of so-called conforming loan mortgage rates which are significantly less than the larger “jumbo” loans many California buyers must obtain because of the higher costs of housing in most parts of the state.
CBIA is urging lawmakers to make permanent the even-higher loan limit of up to $729,750, which Congress enacted for this year only earlier this year when it passed its first housing stimulus bill.
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The California Building Industry Association is a statewide trade association representing thousands of homebuilders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals. 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.