There’s A Very Good Reason Why The New Home Sales Data Plunged In November 2009
Posted on December 28, 2009
Filed under Real Estate Sales
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Author's Note: This post was written for Bring the Blog, a mortgage and real estate professionals' service that writes supplemental blog content. I am the owner of the company. The local keywords "Cincinnati" and "Ohio" were added automatically via Bring the Blog's localization system.
One day after November’s Existing Home Sales report blew away estimates, the Census Bureau’s related New Homes Sales report failed to impress.
A “new home” is a home that is newly-constructed; not bought as a resale.
In a lackluster showing, New Home Sales dropped 11 percent in November, falling to the lowest levels since April. Furthermore, the all-important “months of supply” climbed by a half-month to 7.9.
The press pounced on the figures and if you only read the headlines, you’d think that housing had cratered.
Some of the angles were quite bold, even:
- Weak U.S. Home Sales Show Recovery’s Shakiness (Reuters)
- New Home Sales Plunge In November (CNNMoney.com)
- Housing Forecast : Off Life Support, Still In Critical Care (CBS News)
And these headlines, although technically accurate, only tell half the story. The other half relates to November 30’s role as the original First-Time Home Buyer Tax Credit ending date.
See, different from home resales, when a contract is written on a newly-built home, the home is rarely finished. This is the same in Ohio as in any state in the union. According to the Census Bureau, just 1 in 4 such new homes are sold “move-in ready”. The other 3 of 4 are in various stages of construction when a buyer signs on the dotted line.
Some have yet to break ground, even.
Regardless, it’s at this date of signing that the Census Bureau counts the home as “sold” — not at the actual closing. This is the main reason behind the November New Home Sales data dip.
First-time home buyers in Cincinnati would have risked up to $8,000 in federal tax credits if they had (1) signed for a newly-built home and (2) it wasn’t ready for move-in by November 30, 2009.
It wasn’t until November 5 that the credit was officially extended, remember.
So, suddenly, the fact that first-timer home buyers represented more than half of last month’s Existing Home Sales isn’t so shocking. "Buying new" in Novembers carried a lot of risk.
There’s always more to the story than the headline. Sometimes, you have to dig deeper.
Looking back over 10 months, the housing market is on a steady course of improvement. November’s New Home Sales data — although weak — is not terrible. Despite what the papers might say.
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Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.












