What's Really Behind the Surge in New Home Sales
So I was reading this blog on YAHOO FINANCE about the big jump we just had in newly constructed homes. The Virgin Islands sort of beats to its own drum, so I don't know how much this relates to us. But I do have my own opinions about new home construction. And my relationship with numerous builders and contractors on the island keeps me informed.
One thing I have noticed is that the good builders and contractors are staying busy, regardless of what the National papers tell us about the economy. I don't see as much new construction as I did five years ago, but it is still happening.
Another thing I have noticed is that when everyone THINKS things are horrible, or will be horrible, they freak out a little bit. Part of this freak out includes lowering their rates to assure they stay busy. It is likely that some people are taking advantage of cheaper services. Unfortunately, that is not me. I worry less about price and more about getting the right person for the job so it doesn't cost more in the long run.
I have had a couple of meetings with architects lately, all with regard to new home construction. I had not had any meetings like that in some time. Guess you can figure that one out for yourself.
My conclusion: People are tired of waiting around listening to the doom and gloom of the news. There is still money in this world, and it will be spent. Whether it be new homes, existing homes, or something unrelated to real estate, the fact is that money will be spent. Don't always be so quick to buy into everything you read.
For the Yahoo Blog, read below.....
It's big, no question. A 27 percent monthly bump up in sales of newly constructed homes.
To me this is real proof of the tax credit boost, because this data series is based on contracts signed, unlike the Existing Home Sales series we got yesterday from the Realtors, which is based on closings (so contracts signed in Jan/Feb).
The tax credit expires one week from today, so the March and April numbers should reflect that. That said, I thought it would be useful for you to hear what some of the analysts are saying:
Dan Oppenheim/Credit Suisse: The improving trend in sales is consistent with our expectations for rising activity through April based on the pull-forward in demand ahead of the tax credit expiration.
However, the tax credit does not appear to create incremental buyers, but just shifts the timing of purchases so that the stronger March and April are, the worse May and June will be.
We expect the focus to soon shift to the severity of the payback, which is likely to undermine builders' quest for profitability especially when combined with rising materials costs.
Michael Rehaut/J.P. Morgan: We expect the builders to continue to show positive order growth during the spring selling season, as well as order growth in the second half of the year, as community counts stabilize and the builders gain share against a more stable housing backdrop.
As a result, we reiterate our positive sector stance based on our outlook for the builders to continue to demonstrate positive order growth, improving margins and less charges, which we believe should serve as positive catalysts for the group.
Mark Hanson/Housing/Mortgage Analyst: I am fairly confident that new home sales (counts) are really close to bottoming in here. Note, that is the very first time I have ever said this about NHS. In fact, in Feb sales actually rose MoM on a not-seasonally adjusted basis by 2k units...24k vs 22k in Jan. And unlike existing sales, weather could have held sales down a bit in Feb.
I absolutely do not see some sort of building streak on the horizon given foreclosures are back near record highs for the past two months in a row and it looks like in March actual foreclosures will set an all-time record above 90k.
But I do think that building has reached such depressed levels that the 'crash' has ceased in here and Feb's 22k NSA sales-down from Feb's bubble year's average of 90k and last Feb's 29k -will be as bad as it gets for a while.