As The Supply Of New Homes Grows, So Does The Opportunity For A "Good Deal"

The housing recovery showed particular weakness in the New Homes Sales category last month -- good news for homebuyers in Philadelphia, New Jersey, and around the country.

A "new home" is a home for which there's no previous owner.

New Home Sales fell 11 percent from the month prior and posted the fewest units sold in a month since 1963 -- the year the government first started tracking New Home Sales data.

Right now, there are roughly 234,000 new homes for sale nationwide and, at the current sales pace, it would take 9.1 months to sell them all. This is nearly 2 months longer than at October 2009's pace.

The reasons for the spike in supply are varied:

• The original home buyer tax credit expired in November
• Weather conditions were awful in most of the country in January
• Weak employment and consumer confidence continue to hinder big ticket sales

Now, these might be less-than-optimal developments for the economy as a whole, but for buyers of new homes, it's a welcome turn of events. Home prices are based on supply and demand, after all.

As a result, this season's home buyers may be treated to "free" upgrades from home builders, plus seller concessions and lower sales prices overall.

It's all a matter of timing, of course. New Home Sales reports on a 1-month lag so it's not necessarily reflective of the current, post-Super Bowl home buying season. And from market to market, sales activity varies.

That said, mortgage rates remain low, home prices are steady, and the federal tax credit gives two more months to go under contract. It's a favorable time to buy a new home.

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More Information That The Housing Market has Reached Bottom

The national housing market got three pieces of good news in 3 days last week:

• Monday: Existing Home Sales up
• Tuesday: Home values appear higher nationally
• Wednesday: New Home Sales up

And although national real estate statistics are irrelevant to the local markets in which real estate transactions happen, to a country of would-be and wanna-be home buyers, repeated positive news on housing can be a strong signal that it's time to get off the sidelines.

At least, that's what the data is showing us. According to an industry trade group, first-time home buyers accounted for half of all sales of previously-owned homes.

The stimulus package's $8,000 tax credit likely played a role in this 50 percent figure, as well as sagging home prices in most markets and low mortgage rates nationwide. In Philadelphia's very affordable market, where price declines have been truly nominal compared to those in many parts of the country, these first time buyers are seeing even more benefit from the program, and our company is seeing many people acting now to take advantage of the incentive.

But lest we carried away, we can't forget that February's New Home Sales is still the second-lowest tally on record and that two months of data doesn't define "turnaround".

On the other hand, if the trend continues through the Spring Buying Season, we'll likely look back at Winter 2009 as the low point in housing. Since it has been my experience that we only recognize the end of any difficult period in retrospect, these indicators gain more significance in my mind.

(Image courtesy: LA Times)