New Home Sales Decline as Tax Credit End Date Nears

New home sales dropped 3.6 percent in September in a report released by the U.S. Department of Commerce. Sales of new one family houses in September 2009 were at a seasonally adjusted annual rate of 402,000, 3.6 percent below August rate of 417,000 new homes sales.

402,000 new homes is also 7.8 percent lower than the September 2008 estimate of 436,000 new home sales. The median sales price of new homes sold in September 2009 was $204,000 and the average sales price was $282,600.

The supply of new homes for sale at the end of September was 251,000 homes, a 36.5% decline over September 2008 when the supply of new homes was at 395,000. The number of new homes for sale is getting back to a more historical norm,  the current supply of new homes would take 7.5 months to sell at the current sales pace. In January of 2009 the supply of new homes for sale would take 12.4 months to sell.

The overall supply of homes for sale will increase when the first time home buyer tax credit ends on November 30, 2009. The National Association of Realtors (NAR) is lobbying hard for an extension and an expansion of the credit.

Between the tax credit expiring and the Federal Reserve announcing it was going to complete the purchase of $1.25 trillion in mortgage backed securities in the first quarter of 201o this year’s winter housing market is expected to be bleak.

On the positive side is homes are more affordable than they have been for several years and today’s mortgage rates are still hovering near record lows. Home prices aren’t expected to jump anytime soon but current mortgage rates will probably be higher once the Fed as stopped purchasing mortgage backed securities. If you’re planning on purchasing a home or refinancing your mortgage now is a good time to act.