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July-August 2004 – Washington Briefs

Sales Decline In April After Record March An increase in mortgage rates and bad weather in many areas of the United States contributed to a drop in new home sales in April, falling 11.8% from the month before to a seasonally adjusted annual rate of 1.09 million units. This is the lowest level since November […]
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Sales Decline In April After Record March
An increase in mortgage rates and bad weather in many areas of the United States contributed to a drop in new home sales in April, falling 11.8% from the month before to a seasonally adjusted annual rate of 1.09 million units. This is the lowest level since November and it was the biggest monthly drop in more than 10 years, the U.S. Commerce Department reports. But the news is not all gloom and doom. Overall, new home sales are 18% above last year and prices have been rising steadily across the United States.

Although the drop in new-home sales was larger than economists were forecasting, the housing market remains in good shape. The National Association of Realtors reports that sales of used homes-the biggest slice of the housing market-posted its second-best month on record in April.

Some economists and agents say the surge in April was the result of a surge in 30-year mortgage rates, which jumped from under 5.5% in March to about 6.3% in April.

Most economists predict home sales will remain healthy nationwide, perhaps even meeting or surpassing the record high sales in 2003.

David Seiders, NAHB’s chief economist, says the drop in new home sales can be mostly attributed to bad weather affecting starts. “The March bulge in home sales apparently was related to an unusual swing in weather conditions, and market fundamentals remain sound despite an increase in mortgage interest rates from their March lows. We’ve been expecting sales to recede from the early-year pace, but we’re forecasting an annual total of 1.113 million units, up about 2% from the record pace in 2003.”

Three regions registered sales decreases for the month. The South posted the largest decline, down 22% from March. The Northeast dipped 2.5% and sales in the West registered a 10.8% decrease for the month. The inventory of new homes for sale in April was 387,000 units, representing a 4.3-month supply at the current sales pace. “The inventory situation still is fundamentally healthy, and the number of completed units in inventory still is historically low,” Seiders says.

BSC Drive Win-Win
For Michael Weber of the Portland Cement Association, and Roger Lyons, president of Penn Lyon Homes, participating in the Building Systems Councils (BSC) Membership Drive is a win-win situation. Not only do they reap the satisfaction of strengthening the systems-built housing industry, but they each have a new Signature Series golf bag to show for it. Weber, president of the BSC’s new Concrete Home Building Council, brought in several new members during the month of April. Roger Lyons, the recent winner of the prestigious S.A. Walters Chairman’s Award, has been extremely influential in promoting the BSC to other modular producers.

You, too, can participate in the BSC Membership Drive by recruiting new members.

At the end of the Membership Drive, the one member who has worked the hardest to recruit new companies to the Council will win a deluxe, four-day and three-night resort vacation to their choice of more than 40 U.S. destinations. Special thanks goes to the sponsors who have made this membership drive possible: Bonded Builders Warranty, M&T Mortgage and PFS Corporation.

For details, call 800-368-5242, ext. 8353.

Housing Future Bright For Next Decade
The market for new housing will remain strong for the next decade. The national homeownership rate will exceed 70% by 2013 and robust demand will require production of about two million new housing units per year in the interim, according to five of the nation’s leading economists.

Total home sales will average about 8.5 million per year and home price appreciation will average approximately 5% per year, but could be higher if supply constraints continue to tighten. These and other predictions are contained in a newly released forecast by the Homeownership Alliance. The top economists of NAHB, Fannie Mae, the National Association of Realtors, Independent Community Bankers of America and Freddie Mac all contributed to this groundbreaking report, which is now available online at www.homeownershipalliance.com.




Fed Not Hitting Brakes
Are you grumbling into your coffee, thinking the Federal Reserve is slowly crushing your home-building business with higher interest rates? David Seiders, NAHB’s chief economist, says this latest round of interest rate increases is not intended to squash housing or the economy.

“The economy still has a lot of slack in the labor and capital markets, we’re coming off a period of dangerously low inflation and the Fed is moving off an extraordinarily stimulative monetary policy stance that was designed as defense against potentially destructive deflation in the U.S. economy,” Seiders says.

Historically, the Federal Reserve’s tightening in the late 1970s, late 1980s and 2000 amounted to hitting the policy brakes, as did a rather frightening episode in 1994 when the Fed believed the economic recovery was gaining too much forward momentum. “In the present case, the Fed will be gradually lifting the accelerator off the floor rather than hitting the brakes, seeking to shepherd the evolving economic expansion onto a self-sustaining trend characterized by a low and stable unemployment rate as well as low and stable inflation.”

If the Fed is successful, builders can look forward to strong housing demand for many years. Recent NAHB analysis of long-term trends shows that demographics, replacement requirements and other fundamentals should support production of nearly 1.5 million single-family homes per year, on average, during the 2004-2013 period. That, by the way, is up to 2003 standards, when single-family starts hit a record high, Seiders says.

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