July's new-home sales increase exceeded expectations

Although there are a record 4.09 million previously owned houses for sale from which to choose, Americans are still buying new.

That helped push July new-home sales well past economists' expectations, rising 9.6 percent from June's revised numbers and more than 31 percent above their low point in January. Economists predicted only a 1.6 percent increase.

Sales volume was 13.4 percent below that of July 2008, the Commerce Department reported yesterday. The median price of $210,100 was $300 lower than in June and 11.5 percent less than a year ago, the Commerce Department said.

Why buy new when existing houses cost less, are ready for occupancy relatively quickly, and - in these times of stiff seller competition - often have the same flashy features builders are offering?

"It's that old American thing of people preferring things brand new - their own choice of colors and materials," said Marshal Granor, a principal in Granor Price Homes of Horsham. "The smell of paint and wood, the excitement of moving into a new community where all your neighbors are meeting each other at the same time."

Glenn Price, an agent at Weichert Realtors' Media office, who sells both new and used homes, said: "There is always a mystique about buying a new home, being the first owner."

During the years when little was being built in the city, Prudential Fox & Roach broker Joanne Davidow saw new construction snapped up instantly, and at higher prices.

"New means to a buyer 'I am the first to live here,' and they feel good about that," Davidow said. "The cherry on top is, without a doubt, the tax abatement" available to buyers of new construction and rehabs in Philadelphia.

Prudential Fox & Roach's Mark Wade, who sells new and existing condos, observed that while Center City's historic neighborhoods can be a lure for some buyers, "as many empty-nesters and move-up buyers look to simplify their lives, new construction certainly fits that bill."

"A lack of deferred maintenance seems to be quite a draw, as buyers know they will not need to replace a heater, appliances, or carpeting in the foreseeable future," he said.

Sheri Koones, author of several books on home construction, believes one of the biggest forces driving new-home sales is the "green" factor.

"Older houses are very inefficient relative to what can be built today," said Koones, who lives in Greenwich, Conn. "Old houses are energy-guzzlers, which is a growing concern for homeowners."

Also, "some people bought property a while ago and were waiting to build, Koones said. "They now feel a bit more confident about the economy, and they can get better prices from contractors and subcontractors than they could have a while back."

Though most economists remain unwilling to commit to a pronouncement that housing in the United States is beginning to recover from its two-year free fall, they do see positive signs in the sales data released yesterday.

"Builders went three for four in the month of July," said economist Patrick Newport of IHS Global Insight in Lexington, Mass. "Sales were up, inventories down [to 271,000, the 27th straight monthly decline], and data revisions boosted the sales numbers for April, May, and June."

The "one blemish" in the numbers, Newport said, was that the median time it took to sell a new house jumped to a record-high 12.4 months.

"From a builder's perspective, the market for selling new homes is still brutal, despite the recent pickup in demand," he said.

Builders aren't putting shovels into the ground until they are sure they can sell, said Joel L. Naroff of Naroff Economic Advisers in Holland, Bucks County.

"If that careful construction improvement continues, growing demand could remove the declining excess supply fairly quickly," Naroff said.

Sales gains were even more surprising considering that builders continued to go head-to-head against foreclosure sales in the Sun Belt.

Although new houses account for about 18 percent of sales in normal times in the Philadelphia region and other older parts of the country, they range from 50 percent to 75 percent in markets such as Phoenix, Las Vegas, and Southern California.

Granor said the $8,000 tax credit for first-time home buyers, due to expire at the end of November, and the "102 percent U.S. Department of Agriculture financing" available to buyers at his Royersford townhouse project boosted sales in June and continue to do so.

"So we are finding two-income families, for the most part, with limited cash and good credit," Granor said.

On the other hand, many buyers still prefer homes that others have owned first.

Last weekend, Granor said, one prospective buyer at his Chancellor's Run project in Bensalem "only wanted to view a used house we have listed for sale."

"Her feeling was that someone else had gotten the kinks out for her."

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