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More New Homes for Sale

Posted by: Peter Coy on November 29, 2005

Housing bulls are happy about today’s Commerce Dept. report on new home sales. They were up 13% from September, seasonally adjusted, and up 9% from a year ago. What’s more, sales in earlier months were revised upward. Action Economics said “now it’s the U.S. popping bubble theory that’s popping.”

There’s no question that sales remain amazingly strong. The real question is how long it can continue. Remember, yesterday the National Association of Realtors reported a big increase in the inventory of unsold existing homes. And today, the Commerce Dept. said the inventory of unsold new homes is also rising. It’s up 20% from a year ago, even more than the increase in sales.

To be sure, not all of those unsold homes are actually ready for occupancy—only about a fifth are. The rest, as usual, are under construction or in the planning stages. If builders respond to signs of a slowdown with alacrity, they could avoid being stuck with lots of unsalable homes. But will they? I like what Wachovia Corp. said about that today: “Problems will not arise unless all of the homes that are not yet started are built through completion and, at the same time, sales slow significantly.”

Reader Comments


November 29, 2005 3:46 PM

After several reports of declining numbers, it's interesting that the bubble theory should be dead over one sketchy report. This fails to note that after a rally, homebuilder stocks fell, so there were no gains despite the "good" news. Follow the insiders - they sold a while ago. Housing is rightfully over - buying and selling crappy houses to each other does NOT make an economy.

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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