New Home Supply Falls To 16-Year Low

After posting an all-time low in February, New Home Sales rebounded strongly last month.

Based on joint research from the Census Bureau and HUD, 300,000 new, single-family homes were sold on a seasonally-adjusted, annualized basis in March. It's an 11 percent improvement from February, and right in-line with the 6-month average.

The supply of available new homes improved, too, in March, falling by close to a full month.

At the current pace of sales, the entire new home housing stock would be sold in 7.3 months. This is the second-best reading in a year, a statistic partially-supported by the relatively small number of new homes on the market.

There are now just 183,000 new homes available for sale across San Francisco and the country. That's the smallest reading since the Census Bureau started to keep New Home Sales records beginning in 1995.

However, it should be noted that the March New Home Sales data is suspect. The reading's margin of error exceeds it actual measurement by almost double. It's possible that sales volume fell in March instead of rising, therefore. The Census Bureau says as much in its footnotes:

The change [in new home sales] is not statistically significant; that is, it is uncertain whether there was an increase or decrease [in March 2011].

We won't know for certain until future data revisions are made.

If you're a home buyer , though, and want to stay ahead of the market, you won't want to take chances. If the Census Bureau finds its data to be accurate after revisions are made, new home prices will already have started to rise.

You may get your best home value by buying sooner rather than later.

New Home Supplies Fall To An 18-Month Low

If you plan to buy of new construction sometime in 2012, don't expect today's low prices. Like everything in housing of late, the market for newly-built homes appears to be stabilizing and, in some markets, improving.

As foreshadowed by this month's strong Homebuilder Confidence survey, the Census Bureau reports that the number of new homes sold rose to a 6-month high in October, climbing to 307,000 units on a seasonally-adjusted, annualized basis.

A "new home" is a home that is considered new construction. It's the opposite of an "existing home".

Home buyers are comparing new construction to home resales and liking what they see. At the current sales pace, the nation's complete new home inventory would now be depleted in just 6.3 months. This marks the lowest home supply since April 2010 -- the last month of the last year's federal homebuyer tax credit.

By building only to meet new demand, builders are keeping home supplies in check, and home prices stable. They've also found a niche market -- 80% of homes sold last month sold for less than $300,000.

Split by region, the Census Bureau reports October's New Home Sales as follows :

• Northeast Region : +0.0% from September 2011 
• Midwest Region : +22.2% from September 2011 
• South Region : -9.5% from September 2011 
• West Region : -14.9% from September 2011 

Unfortunately, the data may be incorrect.

Although the October New Home Sales report says that sales climbed 1.3 percent last month, the government's data was published with a ±19.7% margin of error. This means that the actual New Home Sales reading may have been as high as +21.0 percent, or as low as -18.4 percent. Because the range of values includes both positive and negative values, the Census Bureau assigned its October data "zero confidence".

As home buyers, then, we can't take our market cues from the published data. Instead, we should look to other metrics including Housing Starts data and the aforementioned homebuilder confidence survey. Each points to strength in the new home market, and foretells higher home prices in 2012.

If you're in the market for new construction, consider writing an offer soon. Home prices remain low and mortgage rates do, too -- a combination that keeps home payments low. Next year, that may not be the case.