Sales of new homes nationwide hit record lows in 2011 according to the latest joint report released by the U.S. Census Bureau and the U. S. Department of Housing and Urban Development.
The joint report released on January 26th, 2012 for December 2011 revealed that the seasonally adjusted annual rate for single-family new homes was approximately 307,000 homes. This is the lowest level ever recorded since the report started in 1963.
The seasonally adjusted annual rate for 1963 was approximately 323,000 new homes. In addition, the 2011 new home sales figures are also 6.2% below the 2010 new home sales figures.
Unfortunately, new home sales nationwide have continued to decline despite sustained record low mortgage rates. There are a number of factors within the real estate industry that are impacting new home sales. They are as follows:
Declining Home Values – home values across America have declined substantially over the last five years during the housing crisis. As a result, homebuyers have been able to purchase comparable existing homes for less money than the cost of building a new home.
Foreclosures – There are millions of foreclosures acrossAmerica. Many of these foreclosures were on homes that were built in new subdivisions leading up to the housing crisis that started in 2007. The foreclosures are typically priced and sold below current market values, much lower than the cost to build a new home.
Underwater Homeowners – There are millions of underwater homeowners who owe more on their home than it is worth. Many of these homeowners are potential homebuyers of new homes. Unfortunately, they are stuck in their current homes until they can rebuild their home equity through property appreciation and or the amortization of their mortgage loan.
Tighter Mortgage Qualifications – Mortgage loans have been much more difficult to obtain due to the tighter underwriting guidelines. Tighter lending guidelines will help prevent another housing crisis. However, the more stringent lending guidelines regarding income, assets, debts and credit scores have eliminated many potential homebuyers from the market. In addition, the tighter mortgage qualifications have prevented current homeowners from refinancing their mortgages. If homeowners were able to qualify to refinance their homes with the record low mortgage rates, they could use the monthly savings from the lower interest rate to accelerate the prepayment of their mortgage loans. This would help homeowners rebuild their home equity.
Limited Construction Financing Options – Banks are the primary source for construction loans to build new homes for companies and individuals. Due to the housing crisis, many banks have stopped offering construction loans. Therefore, homebuilders and individuals are unable to secure the necessary financing to build new homes.
There are many factors that are suppressing the sale of new homes. Hopefully, new home sales will improve during 2012. Because the sale and construction of new homes has a significant impact on the U.S economy. A economic impact report released in 2008 by the National Association of Home Builders stated that 3.05 jobs were created with the construction of one single family home. In addition, the economic impact of the home building industry extends into a myriad of other industries and businesses that supply the products and services necessary to construct a new home. New home construction and sales are an essential part of a healthy U.S. economy.
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