Bitter winter chills demand and new home sales plummet
Demand for newly constructed homes and new home sales have been put on ice during the past few months of bitter cold. Sales of new homes dropped nearly 17 percent during February, and the housing industry continues to experience record low levels of activity. The drop in sales has been partially accredited to skittish lending conditions.
Home construction brought to a crawl
The construction and sale of new homes has slowed considerably during the past few months, which has been attributed partially to cold weather, a glut of foreclosure properties on the market and dwindling demand, according to Reuters.
New housing starts, or new housing being built, decreased by 27 percent during the month of February. New home sales from the end of January to the end of February declined by 16.9 percent, and the seasonally adjusted annual rate of sales slowed to 250,000 from 300,000. New home sales have decreased by 28 percent since February of 2010, according to that year’s data.
Winter conditions likely were a factor in delaying construction, but weak demand is certainly a factor as existing home sales fell too. However, it may equally be the case that banks are unwilling to write huge installment loans for homes few are willing to buy.
Head real estate economist blasts sluggish lending
Lawrence Yun, the chief economist for the National Association of Realtors, blasted skittish lenders and “unnecessarily tight credit” at a recent press conference, asserting that there would be greater numbers of sales if “mortgage credit conditions would return to normal,” according to the NAR website.
Ron Phipps, president of the NAR, echoed Yun by saying that though interest rates for mortgages were certainly lower than many short term loans, lamenting that “credit remains a challenge.” However, it is difficult to justify paying for a new home when prices for existing homes are low. At the end of February, the median price of existing homes reached $156,100 compared to new homes, which have a median price of $202,100 for new homes.
Glut of foreclosures
The housing market is currently riddled with foreclosed properties, and the rich are having a field day gobbling them up. Cash sales made up 33 percent of all home sales in February, and 39 percent of all homes sold were distressed properties, according to Bloomberg.
Federal Reserve Chairman Ben Bernanke has also been pessimistic about housing, being quoted recently as saying that mortgages were “difficult to obtain” and that “there’s no demand for construction,” in a recent appearance before Congress.
Housing data has been indicating that for the lucky few who have the cash or the credit, a great bargain can be had. However, those that are trying to become homeowners will likely have a difficult time. The housing industry as a whole will likely continue to struggle until demand and the supply of credit begin to perk back up.
National Association of Realtors