Census Bureau reports indicate increasing numbers of new home sales, which in December reached the highest level since April 2006. In spite of the fact that the market has been on the rise since November, the overall picture of 2006 remains quite pessimistic, with a drop of 17.3% since 2005, the industry’s biggest decline since 1990. The low sales levels are in part due to a cooling down after several years of record-breaking activity. Forecasts envision low sales in 2007 as well – both for new and existing homes.
This situation, combined with low mortgage interest rates, benefits first-time home buyers. The fixed-rate mortgage rates are expected to rise later this year, and the new home prices will remain low for a while, with builders trying to reduce unsold inventories. In order to boost sales, increasing numbers of builders are offering free upgrades, paying some of the mortgage costs or other incentives. Nevertheless new home construction is likely to drop in 2007, and a 1-2% fall in home prices is predicted by Fannie Mae economists.
Sales of existing homes have declined in 2006 as well, dropping 8.4% compared to 2005.
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The Commerce Department reported last wednesday that sales of newly built homes rose a surprising 3.4% at the end of 2006. The reason seems to be that builders are offering special deals to attract buyers who are looking to take advantage of declining interest rates. I personally think we will see this do a complete 180 for the first quarter of 2007.
They rose 2.9 percent for the month of Decemeber alone. Is this the housing bubble burst everyone has been forecasting. lol
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