Mid 2010 New Home Market Recovering

Mid 2010 New Home Market Recovering

Sales of new single-family houses in April 2010 showed a 47.8% increase above the April 2009 estimate.

This positive news is per a May 26, 2010 U.S. Census Bureau report from the U.S. Department of Housing and Urban Development, authored by Erica Filipek and/or Stephen Cooper, Manufacturing and Construction Division.

According to the Census Bureau’s statistics, this represents a 14.8% increase in sales above the revised March annual projected rate of 439,000 up to 504,000 adjusted annual projected sales.  The figures in either the HUD reports or in the NAHB (National Association of Home Builders) reports need to be looked at carefully, especially the footnotes.

One might be inclined to think that the numbers show month to month sales, when much of the data is reflecting estimate Annual sales.  Still, this is cause for celebration for America’s housing economy.

3 Documented, Reliable Sources of Information for the Mid 2010 New Home Market Recovery in America:

1.  This is consistent with Harvard’s Joint Center for Housing Studies projection from about a month ago, which indicated that the housing market will be heating up during the 3rd and 4th quarters of 2010, for the first time in a couple of years, indicative of a trend upwards.

2.  This is further supported by billionaire Warren Buffett‘s February 2010 estimate, that by “this time next year,” the current housing problems “should largely be behind us.”   Buffett was referring to the over-supply of new houses built and for sale on the market in February of 2010, and his opinion that during the rest of 2010, these residences would be purchased by bargain hunters.  It appears that this is underway, and when this task is accomplished, America can once again resume building new houses and be back on track for a normal housing economy.

3.  And now, the HUD/U.S. Census Bureau‘s data indicates an emerging recovery in sales of new houses.

HUD further indicates that these numbers represent a supply of only 5.0 months of new single family houses at the current rate of consumption.  This stands in stark contrast to the devastating 12.1 months of supply at January 2009, which meant that builders of new houses could stand around a year or more, waiting for their newly built residences to sell back.  As a result of the January 2009 over supply, and the over supply that existed for at least a year (pre-Jan. 2008) prior to that, America’s new housing construction came to a virtual standstill, contributing to the severe retraction of the U.S. housing economy, along with other factors.

If one examines this latest report from HUD, you can see that the Month’s Supply of new single family houses has been steadily declining since January 2009.  Here is an excerpt from the table, starting from January 2009, leading up to April 2010:

12.1    Jan 2009
10.6
10.7
10.6  April 2009
9.5
8.5
7.9
7.8
8.0   Jan 2010
8.2
6.2
5.0  April 2010

So what this means is that the glut of new residences sitting, waiting forlornly to be bought, due to over-building is gradually being consumed because the supply of them is gradually deceasing.

If there is any validity in statistical trends, then it appears that America’s free market system is in the process of repairing itself, at least in the new housing market.  It has been painful and will continue to be the case, for many people.  It appears that the end may be in sight, however, and that is a good thing.

Rand Soellner Architect has proposed a Housing Supply Warning System to the current administration, that would alert residential builders, investors, state and local governmental agencies, like local building departments, of trends in the U.S. residential economy, particularly related to the Supply of homes versus Demand.  In situations where the Demand exceeds Supply (a good thing for our economy), the proposed warning system (sort of like the Homeland Security green, yellow, and red) would be green.  This would mean: things look okay, proceed.  Yellow would mean: there appears to be a trend emerging in which the level of Supply is at or possibly beginning to exceed demand, which means that your newly built house might sit on the market for a 2 to 4 months before selling.  Red would mean: Stop!  Do not build this single family house right now, unless you personally intend to live in it. The Demand is far less than current Supply, which means that if you intend to sell this investment, it could be on the market for a year or more.  Unfortunately, this Housing Economy Warning System does not exist right now.  We are all left to inform ourselves and this website attempts to provide some level of information in that regard.

For people planning on having a new house designed and built, RIGHT NOW, TODAY may be the very best time to begin.  You may never enjoy such historically low prices for land, building materials and construction labor.

If you are considering starting your project soon, please review your options, then if you feel that Rand Soellner Architect might be the right designer of your next new house, please give us a call at: 828-269-9046.