Builders Report 27% Decline in May New Home Sales
Following the expiration of the home buyer tax credit on April 30, net sales per community across more than 1,900 communities dropped 27% according to John Burns Real Estate Consulting's June survey of home builders. In the previous month, sales per community reached 1.84 units, but this month fell to 1.35 units, which is the lowest level since March of 2009.
This isn't a crash", said CEO John Burns. "This is exactly what we thought would happen. Many of the home buyers who would have bought in May, purchased in April instead because of the tax credit."
"Thus far, the price correction has been only minor. Falling mortgage rates, great affordability and positive job growth will build demand back up. The real question has to do with how many distressed homes will be dumped on the market. Those numbers are rising."
Vice President Jody Kahn, who manages the survey, adds "There is a good chance that the Census Bureau will report a decline that is even greater than this, as they reported a much bigger increase in April than our survey showed."
· New Home Sales will remain low: Builders are in for a tough few months given that traffic is a leading indicator of sales. The traffic rating in the survey declined and the color commentary reflected concerns over poor quality and lack of urgency in potential buyers.
· Backlogs will decline: As further evidence of slow sales, builders indicate they expect their backlogs to drop 22% this month, including a 34% drop in Texas which is where the biggest declines in sales occurred.
· Pricing eroded slightly: Pricing increased slightly in the Texas and South Florida regions this month, while most regions showed small declines.
· Starts are falling: Starts fell in eight out of 10 regions during May, as builders felt little hurry to start more homes.
This month, the survey participants included 236 home building executives from 88 MSAs that collectively oversee conditions in 1,900+ communities.
ABOUT JOHN BURNS REAL ESTATE CONSULTING
John Burns Real Estate Consulting is a national consulting firm that helps executives make informed decisions on the housing industry. Companies rely on their monthly reports to guide them through the housing cycle. John and his team also consult with executives all over the country and deliver the information they need to make housing industry decisions with confidence. The company is on retainer with many of the largest companies in the housing and investment industries.
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