- The Washington Times - Monday, July 27, 2009

New-home sales jumped in June, increasing for the third consecutive month and providing more evidence that the beleaguered housing industry, which led the nation into its longest postwar recession, is beginning to stabilize.

Sales of new homes climbed a surprising 11 percent in June to a seasonally adjusted annual rate of 384,000, the Commerce Department reported Monday. Since new-home sales bottomed out at a 329,000 annual pace in January, they have increased in four of the past five months.

However, sales volume last month was still more than 21 percent below the June 2008 level, and it was 72 percent below the peak annual sales pace of 1.38 million reached in July 2005.

The median sales price for a new home in June was $206,200, down 12 percent from the June 2008 median price of $234,300.

The median sales price peaked at $262,600 in March 2007. The cumulative $56,400 price decline through June represents a plunge of 21.4 percent.

The current pace remains weak, but the stabilization in sales is much needed, said Celia Chen, a housing analyst at Moody’s Economy.com. During the second quarter, sales increased at an annualized rate of 22 percent, the first increase since the third quarter of 2005, Ms. Chen noted.

Sales of new homes increased in most regions last month, rising 29 percent in the Northeast, 43 percent in the Midwest and 23 percent in the West. However, sales volume fell 5 percent in the South, where nearly half of new homes were sold last month.

June’s surprisingly high jump in new-home sales — it was the biggest monthly percentage gain since December 2000 — followed other recent good news in the housing industry. The National Association of Realtors reported last week that existing-home sales increased 3.6 percent in June. Earlier this month, the Commerce Department reported that housing starts also increased 3.6 percent in June, reaching an annual rate of 582,000. Building permits also surged in June.

The number of new homes available for sale fell again in June, reaching 281,000 at the end of the month. That represents a supply of 8.8 months, based on June’s selling rate. Inventories of new homes peaked at 11.4 months of supply in November, but analysts say inventory is still too high.

Although the market for new homes is improving, selling a new home has never been harder, said Patrick Newport, U.S. economist at IHS Global Insight.

The median time a new home sits on the market before it is sold reached a record 11.8 months in June. The number is rising because builders must recover their costs, and do not have the option of selling homes at ‘fire sale’ prices, Mr. Newport said.

New homes also must compete with existing homes, many of which are being sold at distressed prices by banks and other lenders after foreclosure. During the first half of this year, foreclosure filings reached record-high levels.

Federal Reserve Chairman Ben S. Bernanke told Congress last week in his semiannual testimony about monetary policy that the decline in housing activity appears to have moderated.

With unemployment expected to remain high for several years and with the first-time homebuyer tax credit of $8,000 scheduled to expire Nov. 30, analysts expect the recovery in new-home sales will be bumpy.

The recovery will be a slow one, and sales will remain below normal — that is, below 900,000 — for at least a couple of years, Mr. Newport said.

During the go-go years, new-home sales nearly reached 1.3 million in 2005 and exceeded 1 million in 2006. Fewer than half a million new homes were sold last year, and sales during the first half of 2009 were running 35 percent below 2008’s January-June pace.

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