The Northeast Fared the Best

Posted on Wed, Aug. 27, 2008


New-home sales up 2.4% in U.S., still lag '07
The Northeast fared the best.
By Alan J. Heavens

Inquirer Real Estate Writer

New-home sales in July increased 2.4 percent nationally over June, yet remained 35.3 percent below July 2007 levels, the Commerce Department reported yesterday.
Two separate measures also released yesterday showed continued erosion in home prices in the second quarter.

"Hardly any new homes are being sold, but at least the sales pace seems to be hitting a bottom," said Joel L. Naroff, chief economist at Commerce Bancorp Inc., of Cherry Hill.

The Northeast performed better than any other region in July, with a month-to-month sales increase of 38.9 percent and an annual rise of 4.2 percent.

The only other region to show a monthly increase was the West, where foreclosures competed with new homes, forcing builders to slash prices to move inventory.

"A rise in new-home sales in July looks like good news on the surface - after all, most analysts had expected a decline," said Nigel Gault, chief economist for Global Insight Inc., of Lexington, Mass.

July's increase resulted from a 5.1 percent downward revision of June's original numbers - so the level of July sales was worse than expected, he said.

The steep decline of new homes for sale from 10.7 months' supply in June to 10.1 months in July was seen as a sign that builders had gotten the message and were bringing fewer homes to market.

"This is . . . a necessary adjustment to bring the market back into balance," Gault said.

Mark Zandi, chief economist at Moody's Economy. com in West Chester, said that although the end of the housing downturn would be "long and painful," it has begun.

"It will take another year - perhaps two - to work off all that inventory, but at least it is no longer rising," Zandi said. "The housing crash is not over, but the bottom is finally coming into view."

Increased foreclosure sales appeared to have an effect on home prices during the second quarter of the year. Standard & Poor's Case-Shiller National Home Price Index, which covers all nine census divisions, showed a record 15.4 percent drop in the quarter, compared with the same period in 2007.

The Office of Federal Housing Enterprise Oversight reported a 4.8 percent drop for the nine divisions for the second quarter year-over-year.

Economists attribute the difference in Case-Shiller and Housing Enterprise Oversight measurements to the fact that Case-Shiller's national index is weighted to more expensive markets, while the federal agency's is weighted to lower-cost ones, making Case-Shiller price declines greater.

Case-Shiller's regular June index, which covers 20 metropolitan areas, but not Philadelphia, showed prices 15.9 percent lower than in June 2007.

"The good news is that while year-on-year price declines continue to set records, the steepest price declines are behind us, and some markets have moved up over the past few months," Gault said.

For the financial sector to recover and the economy to revitalize, Naroff said, the market has to stabilize and home prices have to stop falling.



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Contact real estate writer Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.