New Home Supply Remains Firmly In “Seller’s Market” Territory

New Home Supply Remains Firmly In “Seller’s Market” Territory

The U.S. housing market appears headed for a strong close to 2012.

According to the U.S. Census Bureau, the number of new homes sold jumped to 389,000 units in September 2012 on a seasonally-adjusted, annualized basis.

Not since the expiration of the $8,000 federal home buyer tax credit in April 2010 have new homes sold at such volumes.

September’s tally marks a 5.7 percent increase from the month prior, and a 27 percent increase from September 2011. There are now just 145,000 new homes for sale nationwide and, according to the National Association of Homebuilders, buyer demand continues to grow.

At today’s pace of home sales, the entire U.S. inventory of new homes for sale would sell out in 4.5 months. By way of comparison, in January 2009, new home supply was 12.1 months.

When home supplies dip below 6.0 months, analysts say, it signifies a “seller’s market”; one in which sellers tend to benefit from negotiation leverage over buyers. The national New Home Supply has been below 6.0 months since October 2011.

Perhaps that’s one reason why the average new home sale price has climbed 14.5 percent over the past 12 months to $292,400; and why median new home sales prices have made a similar jump.

With builders reporting prospective buyer foot traffic at its highest level since 2006, home supplies are shrinking at a time when buyer demand is rising.  Low mortgage rates and affordable housing choices contribute, too.

30-year fixed rate mortgage rates have been under 4 percent for all of 2012, and are now under 3.50% nationwide. Low rates make for low monthly payments but, like home prices, conditions can’t remain buyer-friendly forever.

For today’s home buyers of new construction, the outlook for finding “great deals” in 2013 may be grim. New home prices are expected to rise and supplies will continue to get scarce. The best homes in the new construction market, therefore, may be the ones you buy today.

By early-next year, low home prices may be gone, and low mortgage rates may be, too.