New construction revives older neighborhoods

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Spurred by the lowest long-term mortgage rates since 1956, sales of new single-family homes rose to a second consecutive record-breaking high in June at a seasonally adjusted annual rate of 1.16 million units, the Commerce Department reported July 25. |ret||ret||tab|

According to a release from the National Association of Home Builders, this was 4.7 percent ahead of the revised 1.11 million-unit sales pace in May.|ret||ret||tab|

"Mortgage rates hit lower-than-anticipated levels in June, averaging a remarkable 5.23 percent. For many who had been considering a home purchase, the incentive to lock in those rates was just too great to pass up," said Kent Conine, president of the National Association of Home Builders.|ret||ret||tab|

"Looking ahead, with the economy expected to pick up steam, jobless claims on the decline and home values rising steadily, home builders are reporting increased traffic of prospective buyers and expecting strong sales activity in the next six months," he added.|ret||ret||tab|

During the first 12 months after purchasing a newly built home, owners spend an average of $8,900 to furnish, decorate and improve that home more than twice what non-movers spend.|ret||ret||tab|

For the first half of this year, the average pace of new-home sales was running 11 percent ahead of the pace set in the same period last year.|ret||ret||tab|

"At this point, it's nearly certain that we'll set a another record for new-home sales in 2003," Conine said.|ret||ret||tab|

Even with mortgage rates creeping up a bit, they are still quite low by historic standards, he said, adding that the effects of higher rates should be somewhat muted by the continuing availability of adjustable rate mortgages at attractive terms.|ret||ret||tab|

Builder inventories of new homes for sale remained at healthy levels in June. While the Commerce Department reported a 1.2 percent increase to 345,000 units on the market, the majority of that increase was in homes that have not yet been built. Moreover, the supply at the current sales pace fell slightly to just 3.6 months.|ret||ret||tab|

Sales of new homes rose in every region in June, with the largest increase more than 32 percent reported in the Northeast, and other solid gains of 9.8 percent and 2.7 percent gauged in the Midwest and West, respectively. The South posted a nearly 1 percent gain.|ret||ret||tab|

NAHB has increased its forecast for new-home sales for all of 2003 to 985,000.|ret||ret||tab|

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