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:
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 Weekly Market Update (week of August 15th 2011) (craigkamman.wordpress.com)
- Twin Cities doesn’t have a housing inventory problem, we have a jobs problem. (craigkamman.wordpress.com)
- Twin Cities Real Estate Market Update for Week of August 22, 2011 (johnmurphyreports.com)
- Twin Cities Real Estate Market Continues to Show Signs of Improvement: Pending Sales Up 40%, Inventory Down 18% (johnmurphyreports.com)