New home sales rise 5.5% in November
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Implications:  The market for new homes remains sluggish, still suffering from the expiration of the homebuyer tax credit but also from intense competition from the large inventory of foreclosed homes on the market, many of which were built within the past decade.  The tax credit, which required buyers to sign a contract by the end of April, moved sales forward into the early part of this year.  New home sales, which are counted at contract, increased to a 414,000 annual pace in April.  But sales dropped off almost immediately, and have only averaged 289,000 in the seven months since.  It is important to note that, despite the slow pace of sales, inventories are still declining and are already at levels not seen since the late 1960s.  As inventories fall, homebuilders will need to start building more homes.  Given a growing population and the need for more housing, the pace of new home sales should more than triple over the next several years to roughly 950,000.  With lumber prices on the rise in recent months, that process may be underway.  On the price front, the median sales price of new homes rose to $213,000 in November, bouncing back after going below $200,000 last month.  This price measure is down 2.7% versus a year ago.  We expect the new home market to continue to improve, albeit gradually.

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Posted on Thursday, December 23, 2010 @ 11:01 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.