The U.S. Commerce Department just reported that new home sales fell 3.6 percent for September, to 402,000, against a Thomson Reuters prediction of 440,000.  The year over year drop was 7.8 percent; September was the first decline since March, with a 9.1 percent drop in median sales price as well. The West declined 11 percent and the South 10 percent, although sales were up 35 percent in the Midwest. Northeast U.S. saw no change in sales from August. wrote an excellent article based on Philadephia Inquirer coverage of the U.S. report. Talking to various industry analysts, BND looked at both sides of what this trend might mean.

“The decline in new-home sales seems to us to be more a function of the attractive pricing available on resales in the current environment than a reflection of weakening demand,” Michael Feder, Radar Logic’s president told BND. He might well have a point. In Phoenix, AZ, for example, homes appraised at $175-$200k have been selling at $40k or less. We’ve experienced first hand that investors are jumping on these so quickly that private buyers have to catch them as soon as they’re listed and make quick decisions. Why, in such a market, and with consumers having to be ever so budget-conscious, would a new home with its new-home price look attractive?

“Maybe the issue is supply, which fell to its lowest level in 27 years,” said Naroff Economic Advisor’s Joel Naroff. “Builders, at least those left standing, have been making sure they don’t have any houses sitting around, and they have been very successful in controlling inventories.”

The U.S first-time home buyer tax credit expires November 30th, but it’s extension is still being debated in the U.S. Congress.

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