Minnesota Homes Today Local & National News

New Home Supplies Drop, And So Does Homebuilder Confidence

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New Home Supply (2010-2011)On paper, the market for newly-built, single-family homes looks healthy.

Last month, the number of new homes sold on an annualized, seasonally-adjusted basis tallied 319,000. The May reading is the second-highest of the year, and 6 percent above the current 12-month average.

These are strong numbers in isolation. However, after accounting for the dwindling supply of new homes for sale as well, the figures look even stronger.

In May, at the current pace of sales, the complete, national inventory of new homes for sale would have been sold in just 6.2 months. 

That’s the quickest pace in a year and a 3-month improvement from a year ago.

To hear it from homebuilders, though, you’d think that sales were crashing.

Homebuilder confidence slipped to a 9-month low this month; builders report slowing foot traffic; and the prospects for the next 6 months appear weak. This is not the portrait painted by HUD’s May New Home Sales report.

As a home buyer in St Paul , this dichotomy may work to your advantage.

Falling supplies and rising demand correlate to higher home prices. Yet, builders are pessimistic for their market. Therefore, despite the economics, psychology may help buyers experience more favorable negotiations, including complimentary upgrades and other builder concessions.

If you’re a buyer in today’s market, it’s a reason to consider the new home market. There may be good value once you know where to look.

A Simple Explanation Of The Federal Reserve Statement (June 22, 2011 Edition)

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Putting the FOMC statement in plain EnglishWednesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.

The vote was 10-0 — the fourth straight unanimous vote for the nation’s Central Bank.

In its press release, the FOMC said that the economy is recovering, although “somewhat more slowly” than what was expected. Labor markets have been weaker than anticipated and the Fed believes that is, in part, a result of higher food and energy costs, and supply chain disruptions as a result of “tragic events in Japan”.

Some economic bright spots identified by the Fed include expanding household spending, and increased business investment.

These comments were in-line with what Wall Street expected from Chairman Ben Bernanke and the members of the Federal Open Market Committee.

The Fed stayed on message with respect to inflation, too. It acknowledged inflationary pressures on the economy, but attributed them to rising commodity costs and the aforementioned supply-chain disruption. The Fed expects long-term inflation to be stable. 

And, lastly, the Federal Reserve re-affirmed its plan to end its $600 billion pledge to bond markets June 30, and to hold the Fed Funds Rate near zero percent “for an extended period” of time. 

Again, no surprise.

Mortgage market reaction to the FOMC statement has been even this afternoon. Mortgage rates in Minneapolis are unchanged and leaning lower. Note that sentiment can shift quickly, however. If today’s mortgage rates fit your budget, consider locking in your rate.

The FOMC’s next scheduled meeting is August 9, 2011.

Existing Homes Sales Slip In May

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Existing Home Sales (2010-2011)Home resales slipped 4 percent in May, falling below the 5,000,000-unit mark on a seasonally-adjusted, annualized basis for the first time since February.

April’s resales were revised lower, too.

Analysts were surprised by the figures because it runs counter to the National Association of REALTORS® monthly Pending Home Sales reports.

The association’s Pending Home Sales Index is purported to be a forward-looking indicator for the housing market because 80% of homes under contract close within 60 days and recent Pending Home Sales readings show an increase in “pending” homes.

This month’s Existing Home Sales, however, fell flat.

May’s drop in home resales wasn’t limited to a particular region or price point, either. All 4 geographic regions lag last May’s results. Five of the 6 valuation ranges fell, too.

  • $0-$100,000 : +6.7 percent annual change
  • $100,000-$250,000 : -21.6 percent annual change
  • $250,000-$500,000 : -16.0 percent annual change
  • $500,000-$750,000 : -11.0 percent annual change
  • $750,000-$1,000,000 : -20.7 percent annual change
  • $1,000,000 or more : -11.0 percent annual change

The Existing Home Sales report wasn’t all bad, however.

Although the months of housing stock rose to 9.3 in May, the number of homes for sale nationwide fell 1%. This suggests that there weren’t as many buyers in May as compared to April — a function of weather, jobs and the economy. Since April, the jobs market and the economy have shown steady, slow improvement and Mother Nature has been less destructive.

Home resales should rebound in June and July, therefore.

If you’re a buyer in today’s market, home supplies are higher and mortgage rates are lower. The combination makes for ample bargain-hunting. There’s excellent “deals” to be found in Minneapolis. Ask your real estate agent for help in finding them.

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