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New home sales close out 2010 on the rise; predicting increased sales in 2011

Today, the U.S. Department of Housing and Urban Development and U.S. Census Bureau released new home sales data for December 2010 showing an increase of 17.5 percent from the month before, but a decrease of 7.6 percent from a year ago.

The seasonally-adjusted new home sales rate for December was 329,000 homes, a 17.5 percent increase from November’s revised rate of 280,000 homes. The supply of new homes on the market decreased from an adjusted 8.4 month supply in November to a 6.9 month supply in December. The median new home price increased for the month to $241,500 whopping 12.0 percent increase from $215,500 the month before and an increase of 8.5 percent from a year ago.

My Mantra

As has been my long-running mantra, I don’t like “seasonally adjusted” numbers and “rate” of sales. Why, for one I can’t figure out how in the world they compute the numbers. Second, I just don’t think discussing New Home Sales September 2009the “rate” of new home sales paints a realistic picture of the market. I think this holds especially true when we have artificial forces affecting the housing market such as tax credits as we have seen what an artificial “bubble” in the market this can cause.

Here is the raw data, the ACTUAL new homes sold- no fluff, no “adjusting”

  • 22,000 new homes sold in December, an increase of 10.0 percent from November’s revised 20,000 new homes sold and an 8.33 percent decrease from December 2009 when there were 24,000 new homes sold.
    • As usual, the South had the majority of the new home sales with 12,000 this month (54.5 percent of the total in US)
    • the west region had 7,000 new homes sold.
    • the Midwest had 2,000 new homes sold.
    • The Northeast had 1,000 new homes sold.
  • 2010- The year comes to a close with 321,000 new homes sold, a decrease of 14.4 percent from 2009 (and if I might brag for a moment, almost right in the middle of the range I have been predicting all year….:) lucky guess).
  • New Homes in the US in December have been for sale for a median time of 7.9 months since the homes were completed down from 8.2 months in November.

My prediction for 2011…

Well, as I pointed out above, 2010’s 321,000 new homes sold comes in just slightly above the middle of the 300,000 – 336,600 new homes that I predicted would be sold in 2010. Believe me, I don’t think I’m that smart…or that this is an exact science…I just illustrated that an ordinary person in the biz can guess at this stuff just like the economists can and, just like the economists, sometimes my guesses are right.

What does 2011 hold in store for new home sales?

I think the real estate market still has plenty of hurdles to clear, namely mortgage delinquencies, foreclosures and underwater borrowers, however I do feel the market is at, or near, the bottom and in many markets is starting to trend slightly upward. Therefore I’m looking toward 2011 with just a little bit of optimism, particularly with new home sales. Much of the “troubled” new home inventory has been sold off so going forward builders will have to compete with those “below cost” sale prices less and less. This, in addition to the fact that I think there is a certain amount of “pent-up” demand for new homes, makes me think 2011 will be better than 2010 in terms of new home sales. Will 2011 be able to climb back up to the 2009 level of 375,000 new homes? No, I don’t think so, but I do think it will be better than the 321,000 homes 2010 ended with. Therefore, I’m going to go into 2011 predicting 331,000 – 361,000 new homes will be sold in 2011.

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