Choosing Vinyl

Our data feature this week looks at which housing markets across the country have the largest share of new home closings compared to overall home closings, courtesy of Housing IntelligencePro.  The far and away number one was the active-adult nexus of The Villages in Florida, while six other markets follow in which new homes capture more than 30% of all home sales.  To put this in perspective, the national average is about 10%, so these markets definitely have an inordinately large emphasis on new construction.  All of these markets had at least 500 new home closings so far in 2010, although none of them exceeded 1500.  The first on the list to do so is #9 Raleigh, NC, which has had 2,600 new home closings so far this year which account for 29.5% of all home closings.  The first over 4,000 new home closings is #16 San Antonio, where new homes make up 21% of the market so far this year, and #17 Houston has nearly 10,000 new closings this year which account for 21% of that market also.   Last place?  That would be #82, perennial punching bag Detroit, where new homes have only made up 3% of the market so far in 2010.

In broader housing news, the new home market breathed a bit of a sigh of relief this past week when sales data released for June posted a larger than expected gain after last month’s dismal record low.  New home sales in May reached all-time lows following the expiration of the federal homebuyer tax credit but rebounded almost 24% in June, with help from record-low mortgage rates.  All major indictors for the new homes market also firmed a bit in June, a positive sign for stabilizing conditions going forward.  Inventory levels continued to improve while prices held steady for the second straight month after reaching multi-year lows in April.

Improved affordability is the biggest factor behind the recent push in sales activity for new homes.  The new home affordability ratio remains at historically high levels and increased to 59.0% in June due to slightly lower prices and falling mortgage rates.  The new home affordability ratio stood at a revised 57.8% in May and 55.3% during in the same year-ago period.

The premium on prices for new homes have gradually declined compared to its existing home counterpart in recent months.  Nationally, new home prices in June now hold only about a 16% premium compared to resales which is lower than the 18% average dating back since 1990.  The 16% premium in June is also the lowest it has been for any month since October 2008.  When you factor in premium finish packages and other incentives that have become typical in the new homes market over the past couple of years, consumers are starting to see the bargain currently in new construction homes.

The Economy
First-time unemployment claims fell by 11,000 to 457,000 in the week ended July 24.  Initial jobless claims have remained steady around these levels which are not enough to chip away at the currently high levels of unemployment.

The consumer confidence index dropped to a reading of 50.4 in July from a revised June figure of 54.3.  This is the second straight month that the consumer confidence index has declined while reaching its lowest levels since February.  The consumer confidence index is up slightly from the same year-ago period when the index stood at 47.4.  Sentiment regarding the present business situation and employment situation were slightly more negative than the previous month.  Consumers' expectations of business conditions, employment, and income in the next six months were all more negative in July.

In the second quarter 2010, the national homeownership rate decreased slightly from the previous quarter to 66.9 percent.  This is the lowest the homeownership rate has been since the first quarter of 1999.  The homeownership rate was not statistically different than it was from the previous quarter when it stood at 67.1% although it is noticeably lower than it was this time last year when it stood at 67.4%.  High levels of unemployment and an unsteady economy caused homeownership rates to ease slightly last quarter.

Housing Market
New home sales rebounded 23.6% in June to a seasonally-adjusted annual pace of 330,000 units.  However, this was still the second slowest annual pace of new home sales on record while sales activity for the previous three months were also revised downward by 62,000 units.  New home sales are still down 16.7% from the 396,000 unit annual pace this same time last year.  Median new home prices in June declined slightly to $213,400 from an upwardly revised price of $216,400 in May.  Prices are down 1.4% from the previous month and are just 0.6% lower than they were this time last year.  New home prices have held firm in the past two months after reaching their lowest levels in April since December 2003.

In June, new home inventories declined from the previous month to 212,000 units on a non-seasonally adjusted basis.  New home inventory has now recorded 34 straight months of declines and has not recorded a monthly increase in inventory levels since May 2007.  Seasonally-adjusted inventory of unsold homes also declined in June to 210,000 units.  New home inventory levels are currently at new all-time lows.  Months of new home inventory declined to 7.6 months in June compared to 9.6 months in May due to the slight drawdown in the units for sale along with the surge in sales activity last month.

National average mortgage rates declined from the previous week to a new all-time low of 4.54% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on July 29th.  This is the second straight week that mortgage rates have declined and have not posted a weekly increase for the past five weeks.

In the week ending July 23rd, the MBA’s seasonally-adjusted purchase index increased 2.01% from the previous week but was still down 34.24% compared to the same time last year.  This is the second straight week that the purchase index has increased and the highest it has been in over a month.  Despite this past week’s gains, the index remains near its lowest levels in almost 14 years.  The index has also posted declines in nine out of the past twelve weeks following the expiration of the federal homebuyer tax credit.