New home sales blast past expectations

Sales of newly constructed homes leaped unexpectedly in July to hit their highest level since last September.New homes sold at an annualized rate of 433,000 during the month, according to a joint report issued by the Census Bureau and Department of Housing and Urban Development.That far exceeded analysts' forecasts and was up 9.6% from the revised 395,000 rate recorded in June. A consensus of industry experts surveyed by Briefing.com had predicted July sales of 390,000.The news followed other positive housing market reports earlier this month, including a spike in existing home sales, home prices and affordability."There are many economic conditions that led to the surge," said Bob Walters, chief economist for Quicken Loans. "But certainly low mortgage rates, huge price reductions on the high inventory of new builds, and the first-time homebuyer tax credit have been instrumental in getting consumers to take the plunge into the real estate pool of opportunity."Plus, the psychology of the market is changing, according to Peter Morici, an economics professor at the University of Maryland. "The notion that prices will drift down forever is gone," he said. "Now people are thinking the window of opportunity will not be open forever.""Home shoppers visiting builders' model homes are more likely to purchase than earlier in the year," added Brad Hunter, chief economist for Metrostudy, a real estate research and consulting firm.They are also canceling fewer contracts. Of the 10 markets where Hunter examines cancellation rates, most are running at substantially lower levels. In Phoenix, for example, the cancellation rate lately has been about 4% compared with 7% late last year.It certainly is an attractive market. The median price of a new home declined again last month to $210,100, down only slightly from June but off more than 11% from July 2008.
source: cnn.com