PARAMOUNT MORTGAGE - LENDER'S BLOG

July 31st, 2009 7:06 AM
Sales of New Homes Surge

Reported by Adam Shell, USA Today

New home sales surged 11% since May and the nationwide inventory of new homes continues to shrink. This is the latest news released by the government on Monday and indicates a robust pace of home sales since November 2008.

Sales were driven largely by lower prices and low mortgage rates. The numbers, seasonally adjusted, show 384,000 units sold last month vs. 346,000 units in May. More importantly, the inventory supply of homes for sale dropped to 8.8 months in June, down from 10.2 in May. These figures represent the lowest monthly supply of homes since October 2007. Late last year, in the final quarter, home inventory units had swelled to a 12.1 month supply.

Clearly, the trend is for the better. "We are finally working through this excess inventory," says Randall Guttery, professor of real estate at the University of North Texas. "Once we get that excess inventory taken off the market, we can get back to a healthier supply-and-demand-driven-market."

Most experts agree that an inventory supply of six to seven months of new homes for sale represents a normal balance between buyers and sellers. Excessive inventory exerts downward pressure on prices.

Sales gains got an additional boost from the $8,000 Federal Tax Credit for first time homebuyers. This Tax Credit was part of legislation signed into law by President Obama. The American Recovery and Reinvestment Act of 2009 increased the Tax Credit amount and rescinded borrower repayment.
This Tax Credit program has just 17 weeks to go before it expires on November 30, 2009. As the deadline steadily draws near and Johnny-come-lately buyers scramble to take advantage of up to $8,000 in free federal money, lenders and Realtors may feel added pressure to get their deals done in time.

New regulatory rules effective July 30, 2009 introduce mandatory wait times for borrowers to review cost disclosures. Now, regardless of how expeditiously a mortgage file can be processed and underwritten, it cannot close any earlier than the seventh business day after the initial disclosures have been issued. Lenders and Realtors must abide by these new directives.

But even with the new regulatory constraints and the approaching end of the Tax Credit, "evidence is mounting that we have turned the corner for home sales, and that is a precursor for a recovery," says Bernard Markstein, senior economist at the National Association of Home Builders.
Posted by Customer Service on July 31st, 2009 7:06 AMPost a Comment (0)
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