Sales Buoy Hopes for Housing Market

The Wall Street Journal

25 May  2011

Sales of new homes posted a 7.1% gain in April from March, raising expectations that the downturn in residential construction could be near a bottom.

New homes sold in April at a seasonally adjusted annual rate of 323,000 units. That was an increase from March, but still down 23% from the sales pace of April 2010.

In February, new homes were selling at an annual pace of 278,000 units, tying the slowest rate since the Census Bureau began tracking the data in 1963, but sales have risen in the past two months.

The median sales price of a new home also rose in April for the second month in a row, coming in at $217,900, up 4% from the same month last year.

The rise in sales and prices is partly attributed to falling inventory, which some economists say is leveling out an imbalance between supply and demand.

But builders are still feeling pressure to slash prices to compete with foreclosures, which typically sell at steep discounts to market value.

New-home inventory, or the number of new residences on the market, fell to 175,000 nationwide in April, the lowest level on record.

Last week, the Census reported that builders are on pace to start 523,000 homes in 2011. In early 2006, the peak of the recent housing boom, builders were putting up homes at a rate of about 2 million a year.

“It’s likely that we’re pretty near the low,” for new-home sales, said David Stiff, chief economist for Fiserv Case-Shiller, a home-price research firm. “We’re starting to see prices stabilize in some markets, and within those markets, we’re seeing the better neighborhoods improve faster, and that includes neighborhoods with good school districts and shorter commutes.”

A report by Metrostudy, which tracks home construction and sales, found that sales and prices are starting to pick up in some suburban communities. “The places where builders are raising prices are situations where all the stars are in alignment,” said Brad Hunter, Metrostudy’s chief economist. “They’re near lots of jobs and entertainment … Gas prices are part of it. If you’re too far from where you want to be, the commute hurts.”

Demand for properties close to metro areas allowed luxury home builder Toll Brothers to raise prices about $2,000 per house in Loudon Valley Villages, an Ashburn, Va., subdivision not far from Northern Virginia’s job-rich Dulles Corridor near Washington, D.C. That means four-bedroom town homes in the subdivision now sell for about $332,000.

In Chandler, Ariz., about 25 miles from downtown Phoenix, builder Fulton Homes has raised asking prices from an average of $301,700 to $305,233 at the Fulton Ranch community, after a year of keeping them flat.

“Here in the southeast valley…our inventory is way down, so we’re actually competing for houses around here,” said Nancy Niblett, a real estate agent who sold a home in Fulton Ranch last month. “People have realized that prices ain’t getting any lower.”

At Canyon Springs, a community in Palm Beach County, Fla., builder GL Homes has raised prices by more than $30,000 for some luxury homes. A six-bedroom home that was selling for $394,900 in the second quarter of last year was asking $424,900 at the end of 2010.