New Home Sales Set Another Record Pace in April

Sales of newly-built single-family homes set an all-time record pace for the second month in a row in April, nudging up to seasonally-adjusted annual rate of 1.316 million units, according to figures released by the U.S. Commerce Department last week. This was 0.2 percent higher than the revised record sales pace set in March, and 13.3 percent above the April 2004 pace.

"The drive for homeownership is as strong as or stronger than ever and builders don't see this demand diminishing anytime soon," said David Wilson president of the Washington, D.C.-based National Association of Home Builders (NAHB) and a custom home builder from Ketchum, Idaho. "We definitely don't expect to be taking summer vacations this year."

"The housing market is still decidedly on the move," said NAHB chief economist David Seiders. "Buyer demand continues to be boosted by a strong economy and favorable market fundamentals-a mortgage-rate structure that remains low and stable, growing employment and increases in household income and new household formations.
"At the pace we have been maintaining through the first part of the year, we expect new-home sales this year to challenge last year's record sales," Seiders added.

Two of four regions across the country posted higher home sales in March. Sales were up 37.2 percent in the Northeast and 2.8 percent in the West. Sales dipped 0.5 percent in the Midwest and 5.3 percent in the South from the month before.

The inventory of new homes for sale was 440,000, a 4.1 months' supply at the April sales pace. "The inventory situation is very manageable. Many of the homes included are under construction and not yet completed and a significant portion haven't been started yet," Seiders said. "Builders are intentionally keeping their inventories lean in anticipation of increased mortgage rates later this year, and because a limited amount of land is available for building in many areas."

The NAHB also recently released that the remodeling market grew in the first quarter, according to the NAHB's Remodeling Market Index (RMI). The first quarter results were two points ahead of the seasonally-adjusted fourth quarter of 2004.

"The RMI showed a nice rebound from some worse than normal weather this past winter, particularly in the Northeast and Midwest," said Remodelors Council chairperson Don Novak, CGR, CAPS, CGB, a remodeler from Cedar Rapids, Iowa.

The RMI is derived from a quarterly national survey of more than 500 remodelers and is adjusted seasonally. The current market conditions index grew two points, from 50.7 last quarter to 52.9. The future expectations index moved slightly lower from 54 to 53.6, but remained in the positive zone. Regionally, market conditions showed strong growth across the board except for the West.

The current market conditions in the Northeast grew from 46.7 in the fourth quarter of 2004 to 53.8; with a 1.3 point decline in future expectations during the same period. The Midwest grew 2.9 points from last quarter to 48.9, and also showed a slowdown in future expectations from 48.8 to 47.6. The South continues to be a strong performer, growing from 52.9 to 58.4 and a 2.2 point growth in future expectations to 60.1. The West fell 5.1 points from last quarter to 53.6, with future expectations down 3.1 points to 54.2.

"We saw solid growth in the first quarter of this year and continued positive momentum into the next quarter," Seiders said. "Calls for bids, amounts of work committed and backlogs of remodeling jobs are all up, leading us to expect continued healthy growth over the balance of 2005."

The market saw little change in major additions and alterations ($25,000 or more), moving from 49.88 to 50.19.

However, the renter-occupied market-which makes up approximately one-third of all remodeling activity-showed strong growth with a more than five-point gain from 34.45 to 39.7. Minor additions and alterations showed stronger growth, moving from 50.15 to 52.78, with the renter-occupied market again leading the charge on a seven point increase.

The RMI "special questions" section surveyed remodelers on in-house design services and their involvement with retailers and professional design dealers, such as Lowes and Home Depot. Of the 66 percent of remodeling companies that offer design services to customers, only six percent work with a retailer or professional design dealer to install or provide remodeling jobs. Of those that offer in-house design services, 57 percent employed a general designer, followed by interior designer, certified kitchen designer, or architect at 17, 15, and 15 percent respectively.

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