New Home Sales in US soar 16 percent, the biggest rise since 1993

The U.S. Census Bureau and the Department of Housing and Urban Development said that sales of new detached residential homes soared 16.2 percent in comparison with March 2007 sales figures.

As we said earlier, what’s driving the resurgence in new home sales is the fact that in the US most new homes are prebuilt, [unlike in Australia, where most new homes are built to custom contract]. So with the slump in home sales in 2006 and early 2007, caused in a large part by the sub-prime meltdown and the tightening of credit standards by mortgage lenders and the jump in distressed home sales due to increasing foreclosures, the fallout had come home to roost.

The larger US builders had massive overstocks of new home stock. This overstock situaton still exists and the US home builders have become very creative in increasing their sales in the face of this lowering housing demand.
Let’s face it, most people would prefer a new home than an established one, and with the US builders offering a stream of goodies including new cars, mortgage repayment holidays and other finance incentives these stocks would have to decrease.
The other thing that is under considered is that people have to live somewhere and when home sales drop, then pent up demand increases. I liken the demand for housing much like need for a haircut. Sure, we can put off the haircut, but eventually we have to visit the hairdresser. It’s the same with our housing needs, We can put it off till another day, but it won’t go away, as we are eventually forced to act.

About: Rick Adlam: Rick Adlam has been helping clients with home loan finance since 1985 when he was home consultant with AV Jennings. Rick started Equity Home Loans in 1996 to help homeowners become property investors. Rick currently consults in the development of Mr Mortgage for mortgage brokers and HomeMate for new home buyers. Website: http://www.mrmortgage.com.au