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| There's A Very Good Reason Why The New Home Sales Data Plunged In November Posted: 24 Dec 2009 06:45 AM PST
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:
These headlines, although technically accurate, only tell half the story, however. 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. According to the Census Bureau, just 1 in 4 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 driver of the November New Home Sales data dip. First-time home buyers would have risked up to $8,000 in federal tax credits if they bought a newly-built home and it wasn't ready for move-in by November 30, 2009. And it wasn't until November 5 that the credit was officially extended. Suddenly, first-timers representing more than half of last month's Existing Home Sales isn't so shocking. Buying new carried a lot 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.  |
One day after November's Existing Home Sales report | You are subscribed to email updates from Atlanta Real Estate -- Peter Bright, Mortgage Blogger To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
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