This last May, Americans bought new homes at the fastest pace in more than two years! And while you may all remember that April of 2010 was the last month that buyers could qualify for federal home-buying tax credit. The Commerce Department revealed on Monday that sales of new homes increased 7.6 percent in May from April to a seasonally adjusted annual rate of 369,000 homes.
Builders are finally gaining confidence in the market again and starting to build more homes. And with mortgage rates plunging to the lowest levels on record, home buying is now more affordable. Since last year, prices are remaining low and have started to stabilize as well as an increasing amount in sales of previously occupied homes. According the National Association of Home Builders, each home that is built creates an average of three jobs for a year and generates about $90,000 in tax revenue.
Although it seems everything is improving, we are still far away from a healthy market. There may be a reason for the increasing prices. One reason prices could rise is that the supply of new homes for sale is remaining extremely low. Only 145,000 new homes were for sale in May, which is not much higher than the 144,000 available in April, which was the lowest supply on records dating back to 1963.
Luckily, builders are also responding to the low supply. Recently in May, they requested the most permits to start construction on homes and apartments in three and a half years. But at the current sales pace the housing market has, it would take 4.7 months to exhaust the May supply, in which a six-month supply is generally considered healthy by economists.
Despite the sluggish job market, sales of new homes are increasing. The gains in new homes sold were concentrated in two regions of the country last month. Sales surged 36.7 percent in the Northeast and 12.7 percent in the South. Yet, sales fell 10.6 percent in the Midwest and were down 3.5 percent in the West.
Overall, there is still need for more improvement but 2012 is continuing to show a healthier economy. Not only do we see improvement in the housing market but also there has been improvement in the remodeling industry and also foreclosure rates! And, so with this news, we say, "so far, so good!"
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