According to the Commerce Department, new home sales in the US hit a record low in May. The decline since April was by a full third. Economists expected this, since the tax credits ended in April, but even they were surprised by the magnitude of the drop.
As a result of the drop, annual home sales went from 446,000 in April to 300,000 in May, which is the lowest it’s been since the records began in 1963. On the bright side, the NAR reported a much smaller fall in existing home sales for May.
The difference is obvious. With so many foreclosures, REO’s and short sales keeping prices down on existing homes, why would people buy new, and therefore generally more expensive, homes after years of economic strain and uncertainty? In May, the average sales price of new homes was $263,400. The national median price of existing homes was $179,600.
Many concerns have been raised about the disappointing figures, but alarmist attitudes are only going to reduce confidence in the housing market and the economy. The fact is that a lot of people have lost substantial income and job security, so those individuals cannot afford a new home any more than they can afford a short sale or foreclosure home. Many are still losing their own homes. Until these individuals can get back that income and job security, there will a limited pool of buyers, and those buyers are generally going to show a preference for more affordable homes rather than new and expensive homes.
Fortunately, Maui’s real estate statistics in May were quite solid. Condo sales doubled and single-family home sales increased by thirty-five percent year-over-year. Also, compared with May of last year, home prices dropped by eight percent and condo prices actually rose by a small three percent.
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