New-home sales up, prices down in US and abroad
Sales of new homes in the United States rose to their highest level in seven months, providing one of the strongest signs that the decline in the residential construction industry may be over.
But to achieve that stabilization, home builders are continuing to lower prices to lure new buyers – a phenomenon taking place in real estate markets around the world.
In June, the sales of new US homes jumped a higher-than-anticipated 11 percent from the level in May, the Commerce Department reported (.pdf) Monday. The new report suggests that the home-building industry is nearly halfway back to its June 2008 level of sales, after hitting a record low in January (seasonally adjusted).
The problem is that the sales prices continue to fall. In June, the median price of a new home fell back to $206,200, down from $219,000 in May and not much better than the multiyear low of $205,100 in March. Prices for new homes haven't been this low since December 2003.
Other nations are experiencing a similar price pinch.
In Spain, victim of its own boom in new-home construction, the fall in housing prices accelerated during the second quarter, down 8.4 percent over the same period in 2008. In Ireland, the number of new homes being built is expected to fall this year and next – even with price cutting, according to a recent report by commercial real estate adviser CB Richard Ellis. Australia in May saw sales of new homes fall 6 percent, despite low mortgage rates and hefty incentives for first-time buyers.
Even Asian countries less affected by the global downturn are seeing price-cutting. Indian developers are trying to boost their real estate market by moving away from luxury to mid-market developments. In Singapore, developers say their sales of new homes from January through April has already equaled 90 percent of their sales for all of 2008, but prices continued to fall – down 14 percent in the first quarter from the previous quarter and another 5 percent in the second quarter.
A few countries appear to be further along in their recovery.
In Canada, new-home sales jumped a record 32 percent during the second quarter while the inventory of unsold new homes fell to its lowest level in more than two years, the Canadian Real Estate Association reported earlier this month. In the United Kingdom, prices for the second quarter rose 1.1 percent from the first quarter, the first upturn since 2007.
The real estate markets are so hot in China and South Korea that regulators in both countries have warned about new property bubbles forming there. China's property prices are up 6.3 percent from a year earlier and the level of bank lending has tripled, according to the National Development and Reform Commission, even though banks require a 40 percent down payment. In Korea, the central bank is watching a similar boom in lending and a rise in property prices.
The trends in new-home sales in the US are echoed in the trends for existing homes. Even in some of the worst-hit areas of the housing slump, the real estate market is seeing new life.
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