New Home Sales Increase! Still Down 21%!
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)
Post a comment
Comments:
Little boxes on a hillside, little boxes made of ticky tacky little boxes on the hillside, little boxes all the same.
@GyroMight: These are false booms. Take your time. Except in very unusual locations, prices that were supported by non-existent incomes will never return. You'll see more mid and upper foreclosures which will raise median sales prices, and be used as supporting data for more false booms, but the incomes just aren't there.
I bought a smaller place closer to my work. It's also an area that has had a lot of retail development nearby, so the value has actually increased a little in the last 6 months.
Are they looking at housing sales levels that include those wacky no job no down subprime loans? or have we been past that for more than a year now?
@GyroMight: Current prices are closer to normal (and still too high) than what you might be thinking of.
Just think of it this way, if you're "priced out" so is everyone else at your income level. So who is competing with you?
Like legwork said, take your time and buy when you are comfortable with the payment, job security and the economic prospects of the neighborhood.
So...not so much an "increase" as it is a "less of a decrease" from last years numbers.
Dang! Why is my glass half empty again?!
The UK has already had 2 "housing bottoms" and continues to fall
We're broke - not in the sense that we can't pay bills, but there's no way we're dumping all of our savings into buying a house, especially since we decided in a matter of weeks that we needed to move, and that wouldn't have been possible with a mortgage.
If we were going to buy, we'd buy something close to the metro, but as it turns out, those prices are always ridiculously high, making it even more unaffordable. I refuse to take the bus again.
I've always wondered: what qualifies as a McMansion? Is it square footage? Amount of granite countertops/bedrooms/toilets?
So far "A bigass McMansion 50 miles from my job" has the least amount of votes by far, yet if this were actually the case our landscape wouldn't be blighted with suburban sprawl. Methinks people aren't being entirely honest.
/waits for hordes of apologists saying "Well I would live in the city but my toy poodle fluffy NEEDS (not just "would like" but actually all-capital lettered "NEEDS") a 20,000 sq. ft. backyard so unfortunately I have to live out in the burbs. Ideally I'd live in the city so I checked that."
//lives in the city and walks to work...
I chose "I am broke" because I live on the second floor of my parent's house in the suburbs 2 blocks from my office.
I could get my own place, but the amount of money I'm saving by not paying rent is staggering and I really don't believe in the whole "everyone needs his or her own house" capitalistic mantra. That, and I have no idea how long I'll be at my current job (thanks, recession!) so I don't want to commit to a lease.
Maybe if there were better job security home sales would increase as well!
@pecan 3.14159265: My husband's parents live in a McMansion (at least what I consider to be one). They have 5 bedrooms and 4 1/2 baths. I have been told that a house technically becomes a mansion in California when it has 5 full bathrooms and the tax rate is a lot higher than on regular houses. I consider it a McMansion because it's huge, it's in a neighborhood with about 5 different floor plans, and all of the houses are spaced just far enough apart to obey fire code.
@mizike: Consider that not everyone works in a city- not like you can easily walk to a suburban office park with no sidewalks. Personally I refuse to drive 50 miles to work- I think that is what is killing the results- not the McMansion.
If I could afford a large (2,000 to 2,500sqft) home within 10 miles of my place of work I would be interested.
@winshape: Well, it's a legitimate increase from last month. We're just still lower than we were at this time last year.
@samurailynn: According to those specs, I think my parents live in a McMansion..though at one point, we had a full house and it didn't seem quite so large. With their basement renovated, they now have six bedrooms and 3 1/2 baths. Their neighborhood is pretty dense, and you can tell a certain floorplan in the pattern of the houses.
@pecan 3.14159265: McMansions are typically > 3000 ft² zero-lot line homes, with vaulted ceilings taller than the rooms are wide, and "Tuscan" design flourishes. The floor plan is open, with lots of nooks for bad art and bowls of paper-mache fruit. The master bathroom is larger than the kitchen. There are reed stick diffusers and the air smells like fake cinnamon. The kitchen cupboards are 11 feet high. You think you got a great deal at Great Indoors, paying only $3400 for that GE profile range. You breakfast at IKEA because it's only a 5 minute drive away and you still don't know what cleaner is safest for your granite countertops. The 3-car garage has no room for cars because it is full of old toys, clothes and whitewashed French Provincial furniture left over from the previous home you lived in during the 1990s. Your dog has nowhere to s**t because the backyard is 25" X 50" and three-quarters taken up by a pool and cool deck that burns his paws. Your husband has ED and nobody knows why. Example towns are Frisco, TX and Maricopa, AZ.
If your backyard is 25" x 50" I expect the pool is the laundry tub that (literally) covers the entire backyard.
I could go out and buy a huge McMansion about 50 miles from work today, I know where they are and they are CHEAP.
However, like many others here, I would hate driving that far, I complain about my 12 mile commute, besides there is not attraction to those McMansion exburbs, I can't stand them. Nor I do I have an option of walking to work either since I work in a tech center that is off the beaten path out by the suburbs and if I did move downtown my commute would only increase.
So I will continue to rent in the middle somewhere and plan on buying once I feel the market is towards the bottom, which will not happen in May, June or July of any year but in December/January and probably not this year, maybe next year or the year after.
@morlo: Certainly valid - I was just saying how in my case I would rather have a smaller place in a better area that a huge house hours from my job, and that there's a lot more to consider than just how big a house is.
@mizike: Most of the people I know who live in the burbs do so because they have kids, and the school districts out there are better. If this holds true in other areas, I can see how it would coincide with the demographics of this blog.
(Me? I live about 10 miles out of downtown, and get to work [which is actually in a nothern 'burb, but still 10mi from the house] with an electric-assist bicycle; the commute costs less than $.03 worth of electricity and more than $.03 worth of food calories, and *saves* time if one takes into account that I'd need to be going to the gym if I didn't exercise during the commute).
I'd like to move into downtown proper, even losing some square footage, but can't afford it -- 10mi out is 1/2 to 1/3 the price.
The people that bought in the exurbs of San Francisco Bay Area have moved back home to Mexico or Des Moines. Housing values in SF proper have remained fairly strong because anyone with half a brain knows that living 60+ miles from SF (ie: Vallejo) is actually worse than living in Des Moines or Oaxaca...
Just bought a house the beginning of this month.
It's be a wild adventure so far.
Honestly was only 400 more a month than what we paid in rent. And I can do whatever I want unlike a rental.
@mizike: I'm loosely starting to consider a bigger house -- with the baby, our small house now FEELS small.
We'd stay within the city, however (not least because I can't move out of my district during my term), and I don't want MUCH bigger than this because the bigger it is, the more you have to clean. (Also, in the city, the smaller it is, the more yard you get!)
My husband's commute would become a lot less bikeable, though, if we move out of this particular neighborhood. (There's some talk of putting through a bike path from some farther-out parts of the city, that'd be nice.)
@Skankingmike: The g/f and I are still trying to decide between buying and renting by the end of the year. Yes, the monthly payments may be equal to about the price of monthly rent, and hopefully when you sell the house you should get some of that back (tell that to people trying to sell now).
But also, we have to take into account the down payment, which equals at least the total of 12-months of rent would, but all at once. And yes, you can do whatever you want to a home you own, but you also have to fix anything that breaks or needs repair out of your own pocket, unlike a rental.
Even with the $8000 credit, its a big, tough decision to make.
Well, we bought a house this year (at the end of April). We will get the $8,000 tax credit although it didn't affect our decision to purchase the home. We just happened to find the right house at the right time. We put 20% down on a 30 yr fixed. The house is no McMansion but a very unique post+beam house on 3 acres of land in Massachusetts.
We offered the listing price based on comparisons to other recent property sales in the area. The house had been on the market for a while at a much higher price and had subsequently been reduced to the price we offered. The home inspection cropped up some minor things, we brought these up as negotiation points. The next day I got a call from our agent saying the seller just wanted to close the deal and had offered us $19,000 off the price we offered. Since this was the secondary price negotiation after the home inspection we'd already made a substantial down payment of $40,000 and I suspect this was a big motivator in offering us a discount since it looked like the deal would go through. The house had previously been under contract in the fall but the deal fell through because the buyer couldn't secure financing.
Buying the house has been an excellent decision so far. It is significantly bigger than our previous place - the first floor apartment of a city/near suburb two family, 3 BR. The house has 5 BR and a lot more space. My commute is now much longer but I really value a spot where I can't see the neighbors. The total mortgage payment is more than our rent at the old place, but the interest component (expense) is already $100 less than what we were paying in rent and, of course, decreasing with each payment.
I live and work in the country, so the options are pretty good for me. Definitely thinking about buying a place, not a McMansion though.
@LastVigilante: my decision was easy.
Get rid of my dog or buy a house.
Also I've had it up to here with landlords and other tenants. Many factors came into play.
in the end the work we've had to do so far has been made easier (and cheaper) because of family.
My uncle has done most of my plumbing fixes that would've cost me closer to 3k or more if i had to call a plumber out.
We put our condo on the market about a week ago. We've had 4 people in to look. Buyers are being SUPER picky about everything and prices are down. Our asking price is lower than what I paid in early 2002.
@mizike: I think that's only true if you consider all subdivisions to be McMansions, and I don't. I'm not inclined toward a new build myself, but it's made sense for the friends who've done them. None of them are more than 5 miles away from work, either.
I have no debt, some savings, and I'm a renter. I just negotiated almost a 10% cut in my rent with my landlord on a 14 month lease.
Am I planning on putting all my money into buying a home that is more than likely currently overpriced? No. I will rent a while longer and continue to build my savings, thanks.
$400/mo more than renting a similar home? Is that including your taxes and insurance?
@mizike: McMansions I've seen have basically no property. The house goes to the edges except for a patch of grass in the front, and maybe a 6 foot deep backyard that runs the width of the house. Of course, the backyard has a deck build on top of it, so really there is no backyard.
@spinfire: I envy those who live in areas where land is measured in full acres, compared to fractions of an acre. In the puget sound area at least, plot sizes can be so small they don't even mention it in fractions of acres, but in square feet.
Closer in to the city (Boston) that is certainly true as well. Our house is in Littleton, MA, which is a good ways outside of Boston. I work on the fringes of the greater Boston area that still qualifies as city-esque (Waltham, MA) so that makes my commute much more reasonable (~22 miles each way).
@Doctor Rockso!: wasn't renting a similar home I was renting a bottom part of a 2 family 2 bedroom place. And yep that includes everything.
If i wanted to rent a similar home (as in what I current purchased) it would've been closer to 600 + more a month in rent.
@Doctor Rockso!: This is why we're not buying, or even considering it. We simply can't sink so much money into a down payment. Once it's gone, it's gone and we'd be starting from practically zero in savings. We haven't been in the workforce very long, and we're just too young to do this.
Personal ways to determine:
square footage is 25% larger than comparable area homes
lot size is very small (minimum required by fire code, usually)
in a neighborhood of very similar houses
usually has a pool (with enclosure)
No trees (or 1 lonely tree)
Very high vaulted ceilings (enough to justify a 2nd story)
VERY high HOA fees ($200/month on a $1000/month mortgage)
More bedrooms that are usually required (average single-family home has 4 bedrooms)
VERY small lot (usually unfenced)
Large master bathroom (usually with Garden Tub and separate shower)
[www.neighborhoodsofeastorlando.com]
The basic concept is to make a big house in on a reasonable area. You do this by taking up most of the lot you build on, giving it large square footage, making it usable through an open floorplan, and making the illusion of further grandiousity with vaulted ceilings. Bonus points are awarded for a >2 car garage (or oversized), and pool enclosure (seals the deal of having no land use). Further bonus points if you can spit from inside your house and hit the neighbors window with little trouble.
@mizike: The people that read this blog tend to be sensible. McMansions typically have high HOA fees, commute, and electricity costs (those vaulted ceilings and extra square feet have to be kept cool/warm), and are often the poorer long run choice (by the numbers). Obviously some people want them, but I don't expect them to be reading a penny-pinching site like Consumerist.
@Skankingmike: Just bought a house and we are paying $200 LESS than the apartment (30 year fixed, $300 MORE on the 15 year fixed that we are paying).
Thanks, inflated Orlando apartment market! Glad to be gone!
Buying a house should be a fun and exciting experience as well as rewarding. I bought my first home this past April and dropped from a $740/mo rent to a $640/mo mortgage and are currently making double payments on it. If you have the money ready it won't be a finincial nightmare; if it is, you should hold out, even if you miss this years 8k incentive.
The Wife and I are still about a year or so from having enough to put a nice size cash amount down on a house. I know it is selfish of me to want the prices to stay down for a little bit longer. But I am convinced that by the time it is time for us to buy prices will be back up to normal.