U.S. new home sales dip slightly; local executive sees sharp rebound

WASHINGTON - Sales of new homes in the United States dipped slightly in August from July, but the median price of homes sold during the month rose by a record amount.

In Las Vegas new-home sales have rebounded sharply from last year, one homebuilder executive said.

Nationally, new-home sales edged down to a seasonally adjusted annual rate of 373,000 in August, a dip of 0.3 percent from July's revised rate of 374,000, the Commerce Department said Wednesday. That had been the fastest pace since April 2010 when government tax credits were boosting sales.

Sales in August were up 27.7 percent from the pace a year ago. But even with that gain, new-home sales remain well below the annual pace of 700,000 that economists consider healthy.

The median price of a new home jumped 11.2 percent in August to $256,900, the biggest one-month gain on record.

The median sales price was up 17 percent compared to August 2011. The $256,900 median price in August was the highest sales price since new homes sold for $262,600 in March 2007, a period when prices were coming down from the peaks reached during the housing boom.

By region of the country, sales rose by the most in the Northeast, climbing 20 percent. Sales were up 1.8 percent in the Midwest and 0.9 percent in the West. However, sales in the South, which accounts for nearly half of new home sales, dropped 4.9 percent.

Rob McGibney, Nevada division president for KB Home, said a tight inventory of resale homes in Las Vegas has driven buyers to the new-home segment.

"I can't speak to the national numbers, but in Las Vegas, the new-home market is much different than last year. It's night and day," McGibney said. "There's not a lot of inventory, and that's forced buyers to look at new homes, and I think they're liking what they're seeing."

McGibney said he hears from buyers everyday who thought they could get a "screaming deal" on a house in Las Vegas, only to be disappointed when it's not there for them in the end.

Now they're seeing value in new homes, and pricing has gone up "fairly significantly" this year, he said.

"The market's definitely moving and it's moving based on demand," the Las Vegas home building executive said. "The interest rate is definitely helping new-home sales. It helps people on the bubble, and it helps people buy bigger homes."

Home Builders Research reported 593 new-home sales in Las Vegas in August, compared with 462 in July and 381 in August 2011. The median new-home price was $203,365, up 2.3 percent from a year ago.

despite improvement, weakness remains

Robert Kavcic, an economist at BMO Capital Markets, said the August report was "more evidence that a recovery in U.S. housing is taking root."

Kavcic said that the drop in sales in the South could have been influenced by disruptions from Hurricane Isaac in August.

Sales of previously occupied homes jumped in August to the highest level since May 2010. Builder confidence is at a six-year high and construction of single-family homes rose last month to the fastest annual rate in more than two years. However, even with the gains, home sales and construction remain well below healthy levels.

The housing market has been making a modest but steady recovery, helped by the Federal Reserve's efforts to give the economy a boost through lower interest rates. The Fed earlier this month announced a third round of bond buying in an effort to stimulate the economy and attack unemployment which has been stuck above 8 percent since early 2009.

Home sales have been bolstered by the lowest mortgage rates on record. The average rate on the 30-year fixed mortgage touched a record low of 3.49 percent last week. The rate has been below 4 percent all year. Some economists are forecasting that the Fed's new program to $40 billion a month in mortgage backed securities will push 30-year mortgages down close to 3 percent in coming months.

However, Bloomberg News reported on Wednesday that the Federal Reserve's latest mortgage bond purchases so far are helping profit margins at lenders including Wells Fargo and JPMorgan Chase more than homebuyers and property owners looking to refinance.

Since the Fed's Sept. 13 announcement that it would buy $40 billion more securities per month, the rates offered for new 30-year loans have fallen by just 0.11 percentage point, compared with a drop of more than 0.6 percentage point for yields on the bonds into which the loans get packaged, according to data compiled by Bloomberg and Bankrate.com. The gap between the two, which typically signals increasing lender revenue when it widens, has reached a record of more than 1.6 percentage point.

other factors might drag down prices

In addition to increased demand from buyers attracted by the low rates, home prices also are rising because of a decline in foreclosures and sales of other deeply discounted homes. But many homes in the foreclosure process will likely come on the market in the coming months, which could drag on prices.

However, the factors supporting a revival in housing must confront lingering problems. Many Americans, particularly first-time homebuyers, are unable to qualify for a mortgage or can't afford larger down payments, tougher standards that banks are requiring after the subprime mortgage crisis.

Though new homes represent only a small portion of the housing market, they have a disproportionate impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to statistics from the National Association of Home Builders.

Review-Journal writer Hubble Smith contributed to this report.