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- There was a big rebound in new home sales in October after a very poor showing in September. Even with the gain, the sales pace of newly constructed homes is only about half of what it should be. Home builders need to get busier.
- Specifically, the annualized sales pace in October was 495,000, a gain of 11 percent from one month ago and 5 percent from one year ago. The Northeast region made the biggest gain, matching the region’s best performance in 5 years.
- One reason for the increase is that builders are evidently constructing more affordable smaller-sized homes. The median price of newly constructed homes in October was $281,500, the lowest price in over a year. The price is still considerably higher than the existing home price of $219,600. Because the gap between new and existing home prices has been larger than normal, either builders need to focus on less expensive homes or there will be plenty of room for existing home prices to rise and catch up.
- Whatever builders build, sell quickly. In the past month it took an average of only 2.8 months to find a buyer, the lowest in at least 25 years. Given the general shortage of inventory, home builders need to greatly ramp up production.
- For those small home builders who are still facing difficulty obtaining construction loans from community and local lenders, they should check out the Small Business Administration. There is a SBA program that permits loans to build up to 5 new homes.
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