New Home Sales Hit Two Year High

Dated: November 1 2012

Views: 3050

Good news for the housing recovery as sales and prices coupled with low rates fuel increases in new home sales as the following story highlights:

NEW YORK (CNNMoney) -- In another sign of a housing market recovery, new-home sales rose in September to the highest level in more than two years, according to a government report released Wednesday.

Sales sold at an annual rate of 389,000 homes in the month, according to the Census Bureau report, up 5.7% from the 368,000 sales pace in August. The last time sales were at this pace, in April 2010, they were being helped by a short-term home buyer's tax credit.

How to Spot a Recovering Market

If key local sales indicators beat the U.S. averages (as they do in the areas below), your market is probably picking up -- and prices will soon follow.

       

Metro Area

Percentage With Drop In List Price

Days Listed On Zillow

Sale-to-List Price Ratio

San Jose

16.5%

51

1.01

Cheyenne, Wyo.

21.7%

88

1.08

Clarksville, Tenn.

30.6%

103

0.98

National Average

30.7%

113

0.97

NOTE: Zillow, based on June 2012 data.

This time, the new home market has been showing steady signs of improvement. The pace of home building hit a four-year high in September, according to a separate government report. The year-over-year sales improvement in September reached 27.1%.

The improvement in the market is part of a broader recovery in real estate, helped by a number of factors all coming together.

Mortgage rates are near record lows, pushed down by the Federal Reserve's decision to buy $40 billion in mortgages to spur greater economic growth. The low rates, coupled with years of weak home sales, have resulted in affordable housing prices. Recently, home prices have started to rise, which is attracting buyers who were waiting for prices to bottom out.

There has also been a drop in unemployment, a positive development for people looking for mortgage loans.

Foreclosures have fallen to a five-year low, reducing the supply of distressed homes available on the market.

Related: A new housing boom

"All the housing data has taken a turn for the better," said Steven Ricchiuto, chief economist for MSUSA. "Clearly mortgage rates at such a low level and what appears to be an increase in banks' willingness to make loans has boosted activity off the lows."

New-home sales are an important component of the nation's overall economic activity. Not only do they require people working in construction to build the homes, but they also spur the purchases of appliances, carpeting and other furnishings.

Investment guru Warren Buffett said in a television interview Wednesday that the recent recovery in housing is one of the factors making him more optimistic about the U.S. economy.

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