"New Construction sales shaping up to be worst in 50 years."

If you have read the headlines today, you will see that New Construction sales are the worst in 50 years.  These reports are based off of the US Census report  issued this morning.  Minneapolis Star Tribune covered this story as well.

Sales of new single-family houses in July 2011 were at a seasonally adjusted annual rate of 298,000 … This is 0.7 percent (±12.9%)* below the revised June rate of 300,000, but is 6.8 percent (±13.5%)* above the July 2010 estimate of 279,000.

The Twin Cities did a little better, we saw an increase of 23.5% in new construction sales from July 2010 to July 2011.

Here is a great graph from this report from Calculated Risk Blog:

New Homes Sales 07/2011 CalculatedRisk Blog

Looks pretty terrible.  This is based on a National statistic, but how does it relate to our Twin Cities market?  Below is a chart to compare, this chart only goes back to 2009 – but shows us the recent activity.  We are in slightly better shape than this time last year.  We are also tracking about right for New Construction inventory vs. Previously Owned Inventory, approx 1/5.  However on the Sales, new construction is only accounting for about 6% of the sales – this should be closer to the 1/5 range.

 One of the reasons for this disconnect is financing.  Builders have almost no option on financing new inventory on a spec basis, so a good portion of the “actives” are listed as “To Be Built” (just a proposal).   Buyers are reluctant to buy a house that can only be seen on paper…

  On a side note, when the market comes back it is going to feel like it happened overnight.  With the lending restrictions, it is going to be extremely difficult for Builders to gear production back up when our market will need additional inventory.  This is not a problem yet, but I am predicting it will be.

Twin Cities New Construction Solds July 2011


Minnesota Unemployment Rate up to 7.2% August 19,2011

One of the key components we need for a healthy real estate market recovery is Jobs. If you don’t have a job, it is rather difficult to buy a home.  Unfortunately this report is bad news.  We are back up to 7.2% unemployment rate in Minnesota.

For your property values to recover, we need people working.  If this trend of higher unemployment continues in Minnesota, we will continue to see the housing prices fall.

August 19, 2011 Minnesota Unemployment Rate
There is a ratio used when we calculate housing units needed in an area.  This number is general number used from NAHB, and it can vary depending on the type of jobs created.
But for general purposes, for every 1.1 job created there is need for 1 housing unit.
Instead of adding 1.1 job, we are taking away 1.1 jobs.  What do you suppose will happen to the price of the homes?
No more Location, Location, Location.  Now it is Jobs, Jobs, Jobs!
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