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Cited: CNNMoney.com

According to a seasonally adjusted report by the Commerce Department, newly constructed home sales rose for the fifth straight month in August.  They inched up 0.7% from July, which is 3.4% lower than a year ago.  According to this seasonally adjusted annual rate, 429,000 more homes were sold and that is an increase from a downwardly reading of 426,000 in July.

August sales came in well below economists’ consensus estimate of 440,000, compiled by Briefing.com  New home sales were also 3.4% below August 2008, when the estimate stood at a 444,000 annual rate.  The seasonally-adjusted estimate of new home inventory at the end of August was 262,000, which represents a 7.3-month supply at the current sales rate.

“Price cuts and dramatic cutbacks in home construction are clearing out inventory in a big way,” said Mike Larson, analyst at Weiss Research, Inc., in a research note. “We now have the fewest new homes for sale in this country since November 1992.”

In fact, supply is almost at the point where prices “can be expected to be broadly stable,” said High Frequency Economics analyst Ian Shepherdson in a research note.

Solving the appraisal problem

In recent months, plunging mortgage rates have helped draw buyers into the market. Though rates have rebounded slightly to 5.36% for a 30-year fixed mortgage, levels are still well below last year’s rates, which stood at 6.32% in August 2008.  The housing market has also seen a boost from an $8,000 tax credit for qualified first-time home buyers. That credit is currently slated to expire December 1.

But it is not all good news in the housing market. In a separate report, the National Association of Realtors said that August sales of previously-owned homes fell 2.7% from July to 5.1 million units, well below analyst expectations of 5.35 million.

Where homes are selling?  Sales in the West jumped by 12.1% to 120,000 homes, from 107,000 in July. Activity in the South stayed flat at 224,000 units.  The Northeast saw new home sales plunge 16.3% to 36,000, from 43,000 the previous month. Midwestern sales also fell, by 5.8% to 49,000.

Median and average prices: The median sales price of new homes fell significantly, to $195,200, from a revised $215,600 in July. The average price sank to $256,800 in August from $273,100.

“With more first-time buyers in the market than usual, the published median price data will likely keep falling,” he said.

“The big question is, what happens after the first-time buyer tax credit expires?”

That is one of the top questions right now.  Many of the new homes being sold are smaller residences being sold first-time buyers in the median prices do not take into consideration this as Shepherdson noted.  However, as of this posting there is an effort to extend the first-time buyer tax credit into next year and this could have a drastic change on the median prices of newly constructed homes next year.

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My Take: I am utterly confused by this article.  However, it seems interesting at the same time.  I think it’s all the information it was thrown into something that I think could’ve been just said in a few words like “new home sales are on the rise”.  I think that is all the average person really wants to know, besides when the price is still low or not.

I guess it would not make any difference whether it was Kentucky or Houston real estate that the article were talking about as long as it indicates that new home sales are rising.  But, what about the foreclosures in Houston?  Are they reducing?  What about Kentucky?  What about the rest of the country?  I know you can get KY refinancing when you purchase a Kentucky home.  There is a company that has Louisville mortgage loan programs available to help people avoid foreclosure.

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