Prices of new homes sink 9.7%
Deeper price cuts and other incentives are finally producing the desired effect for home builders: After months of sitting on the sidelines, buyers are nibbling again.
The median U.S. price of a new home sold in September fell 9.7% from a year ago, the biggest annual decline since 1970, the Commerce Department reported Thursday. The result: The number of sales rose an unexpectedly strong 5.3%, the second month in a row of increases and the largest jump since March.
However, the rebound in sales came with substantial pain for builders, analysts said. Increasingly popular incentives -- such as free landscaping, bigger bathrooms, fancier kitchens, no closing costs, cash rebates -- actually make the price declines deeper than the government data indicate. Buyers are getting much more house for the same, or less, money.
Also, the government’s sales figures might make the market look stronger than it really is because they don’t account for cancellations after sales are made, said Patrick Newport, economist for research firm Global Insight Inc. Two of the nation’s largest home builders, D.R. Horton Inc. and Lennar Corp., report that cancellations are running at 30%, about twice the normal rate, he said.
That’s taken a toll on builders’ profits. Irvine-based Standard Pacific Corp. on Thursday reported that its third-quarter net income sank 68% to $30.8 million, or 47 cents a share.
The results “reflect the further weakening of demand for new homes in many of our markets,” Standard’s Pacific Chief Executive Stephen J. Scarborough said.
Prices and sales for resale homes, which represent about three-quarters of the market, also have been weak. Resale prices in September fell 2.5% below year-earlier levels, the National Assn. of Realtors reported Wednesday. That was the largest year-over-year decline since the organization began tracking prices nearly four decades ago.
The economy’s strength overall could help the housing market avoid much more damage.
“Most of the negatives in housing are probably behind us,” former Federal Reserve Chairman Alan Greenspan said Thursday. “The fourth quarter should be reasonably good, certainly better than the third quarter.”
Without widespread job losses, many homeowners will not be forced to sell and buyers will be waiting in the wings.
“There is still plenty of demand for new housing units as this country of 300 million continues to grow, but today’s buyers are only demanding what they can afford,” said Patrick Duffy, director of Hanley Wood Market Intelligence.
Southern California’s new-home prices appear to be holding up better than the nation’s as a whole. In the six-county region, the median price for new homes was $464,000 in September, down only 0.4% from a year earlier, but the number of sales was down 23%, according to research firm DataQuick Information Systems.
The nationwide median new-home price of $217,000 in September was down $22,200 from August. Sales rose to a seasonally adjusted annual rate of 1.075 million homes.
annette.haddad@latimes.com
