New-Home Market Shows Signs of Stabilizing

July 27th, 2011 by Katie K Team

New-home sales dropped in June, but a sharp increase in prices and declining inventories may be signs that the sluggish new-home market is finally rebounding, the Commerce Department reported.

Sales of new homes dropped 1 percent in June, reaching an annual rate of 312,000 — less than half the 700,000 rate that most economists consider healthy for the new-home sector. New-home sales fell to record lows in the Northeast and were also particularly sluggish in the West.

The Commerce Department reported 164,000 new homes for sale in June, which is a record low. Taking into account June’s sales pace, the supply of new homes on the market dropped to a 6.3-month supply, the lowest since April 2010.

However, builders are starting to build more. Last week, the Commerce Department released a report that showed a rebound in June for new building permits — an indication for future building. Also, builders broke ground on more homes in June, with housing starts soaring 14.6 percent last month, marking a six-month high in housing starts.

Meanwhile, the median price of a new home increased to $235,200 in June, up 5.8 percent from May. Compared to June last year, the median price rose 7.2 percent. However, new-homes continue to be considerably higher than previously owned homes. The median price on existing-homes averaged $184,300 in June.


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