New home sales fall in yet another hit to the housing market
Although the economic recession technically ended two years ago, many people in Atlanta and across the United States continue to feel its effects, especially if they are homeowners. Throughout the country, foreclosure has brought down median home values in many areas, making it difficult for standard sales and new home sales to offer competitive pricing. This has led to an unprecedented decrease in new home sales in many parts of the country.
According to the U.S. Department of Commerce, new home sales fell approximately 1 percent in July to a seasonally adjusted annual rate of just under 300,000. If sales continue at this pace, 2011 will replace 2010 as the worst year for new home sales since 1963, the first year that such records were kept. There were 323,000 new home sales in 2010. In order for the housing market to be considered healthy, economists say, there would have to be about 700,000 new home sales in a year.
Although new home sales make up less than one-fifth of all home sales in the U.S., they are considered somewhat of a barometer of the health of the housing market. This is because each new home that is built creates an average of three new jobs and raises $90,000 in taxes, thereby having a greater effect on the market than an existing home sale.
Yet with a shaky stock market, continuing unemployment, and more stringent mortgage lending standards, many potential homeowners are hesitant or unable to buy either new or existing homes. In addition, foreclosures are crowding the housing market, where they sell for an average discount of 20 percent. Although the median sale price of a new home fell more than 6 percent to $222,000, the median price of an existing home was some 27 percent lower, at $174,000.
Source: Atlanta Journal-Constitution, “New-home sales fall, 2011 could be worst year yet,” Derek Kravitz, August 23, 2011