Continued Drop in Home Sales Proves Need for Additional Stimulus Measures

November 14, 2008

SACRAMENTO – The pace of home sales at California new-home communities continues to stumble along at a rate half of that of a year ago, demonstrating anew the need for additional measures to stimulate the housing market, the California Building Industry Association said today.

The monthly CBIA/Hanley Wood Market Intelligence (HWMI) New Home Sales and Pricing Report showed that new-home sales in September were 52 percent below September 2007, similar to the year-over-year declines seen in most months so far this year. During September, 2,061 homes and condominiums were sold in the subdivisions tracked by Costa Mesa-based HWMI, compared to 4,318 in September 2007. Sales of single family homes dropped by 53 percent, while sales of townhomes and “plexes” – duplexes, triplexes, etc. – were down 40 percent and sales of condominiums were down 55 percent.

Compared with the same period last year, the median base price of homes sold dropped by 6 percent.

Robert Rivinius, CBIA’s President and CEO, said that as the state and national economies teeter into recession and as the state’s budget crisis continues to mount that additional measures are needed to stimulate the housing market.

“Congress and the President moved quickly earlier this year to enact measures designed to encourage Americans to take advantage of today’s buyers market, but while these steps were welcomed, they clearly aren’t working as well as had been hoped,” Rivinius noted. “We believe Congress must take further steps to stimulate the market and in doing so to help our economy begin to recover.”

He said that during the upcoming lame-duck session, Congress should take the following steps:

  • Increase the amount of the temporary $7,500 homebuyer tax credit;
  • Make it a true credit that doesn’t have to be paid back;
  • Allow people to get the credit upfront, so they can put it toward a down payment;
  • Provide some type of interest rate buy-down to encourage people to re-enter the market; and
  • Permanently keep the FHA/GSE loan limits at $729,500.

“A recent study showed that in just two years, from 2005 to 2007, the decline in homebuilding in California cost the state more than 221,000 jobs and $28 billion in economic benefit. And given the fact that housing production this year will be at the lowest level since World War II, those losses are even greater today. Clearly, it’s time to help get homebuilding back on track,” he said.

The CBIA/HWMI sales data showed that non-seasonally adjusted total new-home sales were 18 percent lower than they were in August, although it is not unusual for September to show a slower pace of sales activity than August due to seasonal factors. Median base prices of units sold statewide were 9 percent higher than in August, although this is more of a function of a shift in unit mix than any price increases.

Jonathan Dienhart, Director of Published Research for HWMI, said the housing market faces a tough road to recovery due to broader economic conditions.

“The traditional fundamentals of housing demand are likely to remain weak due to recessionary conditions in the broader economy,” Dienhart said. “Hopefully corrective action by mortgage lenders and the federal government can provide a floor for home prices until broader economic conditions improve.”

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The California Building Industry Association is a statewide trade association representing thousands of homebuilders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals. More information is available on the Association's Web site, www.cbia.org.

Hanley Wood Market Intelligence is the housing industry’s leading provider of rich data and consulting services on residential real estate development and new-home construction and is a division of Hanley Wood, LLC, the premier media company serving housing and construction. More information is available on the company’s Web site, www.hanleywood.com/hwmi or by calling 1-800-639-3777.

Hanley Wood Market Intelligence (HWMI) collects data from new for-sale production subdivisions of 10 units or more on a monthly basis. HWMI Net Sales represent sales contracts signed during the period indicated minus any reported cancellations. Median and Average Prices are based upon the minimum asking price of the plans sold during the period and do not include the cost of any lot/view premiums or upgrades. Because this data is collected monthly and based upon sales contracts that represent future closings, HWMI data is the most forward-looking data source available for new home information in the state of California.