New Home Sales Disappointed in May…There is a Silver Lining!

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Got a report via email today from Wachovia Economics Group.

Sales of new homes slid to 342,000 units at an annual pace in May, off of a downwardly revised level of 344,000 in April.  Over the last three months the net revision was a loss of 32,000 units.  While the market was looking for a slight gain, this report reinforces the picture of a market moving sideways for some time.

INVENTORY LEVELS CONTINUED TO DECLINE:  Inventory levels (of new unsold homes) continued to improve and have now fallen 144,000 units over the past year.  Inventory levels are now back below the relatively stable range held during the late 1990’s.  With very little new construction in the pipeline, and even less incentive to begin new specualtive building, we expect that inventory levels will remain depressed for sometime.  This should begin to take pressure off of prices in the medium term. (New homes for sale:  May @292,000).

This info will concur with my thoughts.  Nationallly, inventory levels are down, and maybe headed lower.  I believe that we are in the trough of  this downturn  (that began in 2005) as well,  it should only improve from here.  The inventory in the Alexandria market has progressively swelled from the 2004 market levels.  This increased inventory level coupled with the decrease in sales activity pushed this local market into it’s own meltdown as well.  As of yet, our inventory hasn’t seen much decline, and our sales haven’t improved enough to offset pricing.   After 2nd quarter statistics next month, we will get  a better picture.   But in the trough, I think that we are.  Pricing is key, it’s all about the price right now.  If you have dry powder, right now is the time to buy.    Much like in the 1982 market, it progressively got better as habits and confidence changed and improved.  I have seen predictions that new construction will be at 700,000 units next year.  Still far below 2006, but nonetheless, a doubling from 2009.   Personally, I don’t know how we can hold back from building new homes at an explosive rate at somepoint.  We are increasing US Population at the rate of 3,000,000 people per year.  The floodgates will have to open up, home ownership is still near and dear to every American’s heart.   The Alexandria market has stalled, there are fewer new residential construction homes here as well (although I did sell 3 spec homes, and we are going to dig 3 more).   Sales of building lots have tanked from the stats of ten years or less ago.  But, if you look around there is plenty of commercial activity, maybe more than ever(refer to Archives December 2008).  Buildings need people, people need housing.  When I commute within a 30-40 mile radius of Alexandria, this community has retail, medical, industry, schools, I-94…that other communities don’t have and maybe never will.  So even though our market may be suffering in some areas right now (some folks are making money-this is the economy where wealth is created), a very bright future lays just around the corner here in Alexandria.

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Been Busy

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My Team and I have been very busy.   There seems to be buying activity, pricing is key.  I do believe that the market is in the trough, the bottom we have been waiting for.  U.S. consumers have cause for concern, although this is definitely the time to buy.  These are the times when wealth will be created.  You have to buy and have ownership, to create wealth.   We will slowly work our way out of this, it was inevitable, although some businesses are thriving in these market conditions.  The market was almost delusionary from 02 to 06, a correction was needed.   Understanding the forces of money, a lifetime it will take.   One of the reports that I recently read said that the market will not get “good” again till 2012.  That makes sense, a slow steady climb.  Much like it was back in the 1980’s.  I’m very familiar with that market (I was licensed in 1982).  I will submit 2nd quarter stats soon, I can’t wait to see them myself.   Also, keep an eye on the consumer index, it should be out this week.  I will report it as well.

On another note…homeowner equity.  It’s something that we have had a tendency to discard or misuse.   I just want to say that one must do everything in their power to protect the equity in their home.  I have seen many houses in my career and the best home I have viewed is the one that’s paid for.

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