NEW CONSTRUCTION - Nationwide & West CoastNew Home Sales Rise 11 Percent During June

The National Association of Home Builders reports that in October, nationwide housing production fell 10.6 percent to a seasonally adjusted annual rate of 529,000 units in October as builders awaited word on whether an important home buyer incentive would be extended. Single-family housing starts declined 6.8 percent in October to a seasonally adjusted annual rate of 476,000 units, the slowest pace since May of this year with the West declining by 8.5 percent. Permit issuance, which can be an indicator of future building activity, fell 4 percent overall in October to a seasonally adjusted annual rate of 552,000 units, due primarily to a double-digit drop-off on the multifamily side. While single-family permits held virtually flat at 451,000 units, multifamily permits were down nearly 18 percent to 101,000 units. Regionally, permit activity was mixed, with the West posting a 6.7 percent decline. There was also a recent story indicating that lumber prices have increased although housing construction is still down near World War II levels. unit_inventory_new_construction_Q3_2009 The U.S. Census Bureau also released their construction spending data for October 2009, revealing that the real estate sector dropped 14.4% from October 2008. The residential real estate sector was up 4% which had speculators rallying but spending dropped a staggering 23% from October 2008. New construction inventory has been falling due to slower than average but consistent salespace coupled with a lag in new spec homes coming on the market. Although sales are trending up, builders are still struggling to close sales. The Census Bureau reports that new U.S. home sales rose to an annual rate of 430,000 in October, up from a revised September rate of 405,000. That’s a 6.2 percent jump, but the increase isn’t statistically significant.new_construction_Q3_2009

Another report indicates (released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development) that the median sale price of new homes was $212,200 in October with an estimated 229,000 units available at the end of that month, reflecting a 6.7 month inventory. IHS Global Insight economist Patrick Newport gives these highlights:

  • Inventories fell for the 30th straight month and hit their lowest level since May 1971. That signals that builders at some point will need to boost housing starts again.
  • While the October jump wasn’t statistically significant, the trends show that new home sales are improving slowly.
  • The tax credit didn’t drive any sales bump because the deals had to close by Nov. 30 and these won’t.
  • Selling a new home has never been harder. The median time it takes to sell a new home rose to 13.5 months. The highest reading ever. Builders are still struggling, despite the pickup in sales and the tax credits. Calculated Risk has some nice charts. (See below.)

    From Calculated Risk blog091125.newhomesalesv.recessionjpg.jpg

NEW CONSTRUCTION - Oregon

According to a recent housing report from Norris Beggs & Simpson as reported by OregonLive, the unsold inventory of speculative new homes has fallen this year from 1,200 units in January to 679 in September. Washington County has 37 percent of unsold spec homes; Clark County is second with 26 percent, then Clackamas County with 22 percent and Multnomah County with 15 percent. Outlying suburban markets accounted for two-thirds of new spec inventory in the third quarter 2009. New construction sales are down 72% in the Portland area from the peak of the real estate cycle.

NEW CONSTRUCTION - Portland

My regular readers know I’ve been writing relentlessly about smaller houses. From everything I read, and there was an article in the Oregonian recently that mirrored everything I’ve been saying, I believe the public does want the smaller sq. ft. and that builders will hopefully start accommodating that segment of the market. As I was writing this post I remembered something that happened after the mid-80s recession ended. We didn’t have any new houses to sell. There was no new construction anywhere in the marketplace for buyers to purchase. It took a long time before the builders put new construction inventory back into our market. Will that happen again this go around? I personally don’t think so, but that could happen. With inventory of new houses drying up, builders not building, little to no construction money available, we could be looking at zero new construction as in the mid-80s. I’ve also stated that I believe the large subdivisions are on the way out and that more and more builders, as has already been the case, will be building on in-fill lots or on a build-to-suit only basis for a buyer for some time until new construction gets back on its feet. Sounds like we’re going back to the 80s.

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