New Home Sales See Unexpected Growth

[Nov 13, 2007.]

Sales of new homes rose unexpectedly in September—but that's not necessarily welcomed news. Analysts say it's no cause for celebration, given the rocky times in the overall housing market.

Experts are predicting additional sales slumps. In fact, they say that the real estate industry has probably not seen the worst of the housing crisis, which is already considered to be the worst slump in more than 15 years.

According to the U.S. Commerce Department, sales of new homes inched up 4.8% in September. As a result, the seasonally adjusted rate stood at 770,000. Interestingly enough, forecasters had been predicting that new home sales would actually decrease by as much as 2.5%.

The growth appeared to have occurred in the West rather than in other sections of the country. As a result, an official with the National Association of Home Builders told the media that the sales rise was no indication that the housing market has rebounded.

However, the month before, sales dipped to an annual rate of 735,000—a figure which represents the worst sales totals in more than a decade.

Delinquencies on home loans have been rising, causing lenders to tighten their terms for a home loan. The industry has been battered by a crisis of epic proportions in the subprime market. Subprime loans are those loans that are extended to individuals with shaky credit histories. Still, some analysts are predicting that the subprime market will recover, even though the crisis has forced numerous lenders out of the subprime business altogether.

Experts say that the troubled housing market will continue to falter until inventories are under control. It could be summer of 2008 before the recovery begins. While the median sales price for a residential home rose in September, analysts believe that prices will decline in the coming months.

Julie Ann Amos
November 13th 2007

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