New Home Sales Hit Lowest Level

Sales of newly built homes dropped to their lowest level since the government started tracking the numbers more than four decades ago, with demand for home purchases down in all four regions of the country.

The Commerce Department reported Wednesday that new homes sold in July at an annual rate of 276,000, down 12.4 percent from June and down 32.4 percent compared with the same time last year.

The economy is backsliding a little bit. While it's too soon to tell if that's going to result in another recession, it seems clear that consumers are holding back on committing to major purchases, such as buying a home.

The drop was led by the Northeast, where new home sales fell nearly 35 percent. Sales declined 25.5 percent in the Midwest, 15.1 percent in the South and 9.8 percent in the West.

The underlying demand is extremely weak, despite rock-bottom mortgage interest rates.

The poor new-home sales results follow another damaging report on the existing-home sales. Those sales fell in July to their lowest level in more than a decade to an annual rate of 3.83 million, down 27.2 percent from June's pace.

Housing Market Indicators

Florida existing home sales: 15%  (month-to-previous-year comparison)

Florida existing condo sales: 33%  (month-to-previous-year comparison)

Florida existing home median price: $143,400

Florida existing condo median price: $95,000

Florida consumer confidence: 65

National existing home sales: -5.1% (month-to-previous-month comparison; all housing types)

National existing home median price  $183,700

National (Freddie Mac) mortgage rate 4.42%  (all housing types)

Reasons to Buy Your Dream Home Now

Low mortgage rates serve as an equity shock absorber. When buyers borrow at today's record-low rates, they start building equity as soon as they close. That means they can absorb a few ups and downs as the still-recovering housing market gains traction.

Houses are in move-in condition. Home owners have continued to spend on maintenance and repair, according to the Harvard Joint Center on Housing. As these houses enter the market, they are in marked contrast to tattered foreclosures.

Terrific houses are coming on the market. Foreclosures are finally starting to clear the system, and they are being replaced by some very attractive properties.

Appraisal regulations are finally aligned with market realities. Fannie Mae has adjusted its appraisal guidelines, giving appraisers more flexibility to set values that reflect the current market.

Plenty of programs. Many programs that encourage middle-class families to buy homes continue to exist, despite market downturns. Buyers who qualify can get a big boost by combining one of these programs with today's low mortgage rates.

Suburban Century Is Over

At a recent meeting of the Urban Land Institute of Minnesota, Senior Fellow John McIlwain said "a new normal" will be created in the housing market over the next 10 years, and he marked the end of "the suburban century."

He noted that markets offering "a vibrant 24/7 lifestyle" will see the most robust activity, "net-zero-energy" units will become the norm, and the rental market will expand as homeownership rates fall to more historic levels.

Suburban town centers will gain popularity among those wanting an urban lifestyle without living in a big city.

Over the next decade, McIlwain said four demographic groups will fuel the housing market. He said older baby boomers increasingly are moving back to the central city, while younger baby boomers are finding it more difficult to relocate for jobs because they cannot sell their suburban houses. Meanwhile, millennials are more environmentally aware and will seek urban lifestyles, and immigrants who cannot afford large suburban houses to shelter multiple generations will increase demand for rentals.

With 1.5 million housing units per year needed to accommodate the shift to normal levels of household formation, McIlwain said zoning, financing, and regulations need to be rethought to meet housing demand.

Mixed Market Messages

Local housing markets home prices appears to be growing. For instance, 13 metropolitan areas in the S&P/Case-Shiller 20-city index experienced price appreciation over the 12-months ending in May, compared to 11 in April and 10 in March.

“However, existing home sales in June slowed to an annualized pace of 4.37 million units, the fewest since March. Moreover, although new home sales jumped by almost 24 percent to 330,000 dwellings, it represented the second slowest rate since 1963.”

Mortgage Rates - fall to all-time record lows

Freddie Mac released the results of its Primary Mortgage Market Survey, with the 30-year and 15-year fixed-rate mortgages reaching record lows. (The 30-year fixed-rate survey began in 1971, and the 15-year began in 1991.) 30-year fixed-rate mortgage averaged 4.54 percent. Last year at this time, the 30-year FRM averaged 5.25 percent. 15-year FRM this week averaged a record low of 4.00 percent. A year ago at this time, the 15-year FRM averaged 4.69 percent.

Rents Rise as Apartment Vacancies Fall

Apartment vacancies were down and rents were up last month as people got tired of living in their parents’ basements and rented a place of their own.  Nationally, the apartment vacancy rate was 7.8 percent at the end of June, down from 8 percent in the first quarter.  Rents rose 0.7 percent from April to June, the largest quarterly gain in two years.