The world is currently overjoyed at the news that new home sales have increased by 11% this month, which is apparently much more than expected, but are still 21% below the levels of a year ago.

Some analysts are worried that the bottom will fall out when the first-time-homebuyer credit expires:

Pat Newport, a housing industry analyst for IHS Global Insight, also deemed the report very good news — but is uncertain how Obama’s $8,000 tax credit for first-time homebuyers will affect the longer view.

“I only wonder how much of the increase is coming from rising demand from new homebuyers,” he said. “The tax credit is boosting demand, but what will happen when it goes away in December?”

Currently there is still an 8.8 month supply of new homes, many of which are inconveniently located really far away from the few remaining jobs.

Much of that struggle is because the housing stock is concentrated in exurbs — otherwise known as McMansions far away from work. “Inventories are misaligned,” said Morici, who likened the situation to the auto industry being overstocked with large trucks and SUVs instead of fuel efficient cars.

“There’ll be a shift from far-out to closer-in and from bigger to smaller,” he said. But builders will have a hard time selling those “white elephants” and they’ll languish on the market, he predicted.

Are you in the position to buy a new home? Are you looking at McMansions?

New home sales: ‘Really good news’ [CNN]
(Photo:Plant Design Online)

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