January New Home Sales Numbers: What They Mean

5 Mar
2010

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You may have heard this announcement earlier this month: “January new home sales fell to a record low.”

This is true, but we can put it into perspective. Perspective is always important in managing consumer confidence!

The record low applies to new construction, not overall home sales. While there are great deals in new construction right now, builders simply cannot discount homes like regular sellers can. Builders have a finite cost to everything they put in. The deals they will offer are free upgrades, appliances, and other benefits. They can only slash their prices so much — this leads some buyers to resale instead of new.

January is already a very slow month in home buying. And to close in January usually means you went under contract in the weeks leading up to the Christmas holiday or during Christmas. This is not a very popular time for people to buy homes unless they need to.

Another possible factor in January sales is the availability of tax credits. Some buyers did their best to squeeze their closing into the 2009 calendar year in order to get the benefits of home buying on their 2009 return. This can leave a bit of a lull after people rush to get their purchase complete before the end of the year, or before the Christmas holidays. This is a potential reason for a slow January in any year for any type of home sale.

Finally, you can never judge the market by one month. The market can change a lot from month to month, and average out. Remain calm! Monthly numbers can make exciting headlines, but they aren’t always a true indicator of the market because they cover such a short span of time.

With the entire Eastern part of the country buried under a major snow storm for a large part of February, we could expect some low numbers in home sales after this month is over. Just remember, there are factors like this that can affect monthly sales.

One more fun fact: in the Midwest, these numbers are actually UP 2.1%, so it is not as relevant for our area. So remember that when you hear an announcement on the news, it may vary by region. (The Northeast new home sales were the hardest hit.)

For Cincinnati and its specific neighborhoods, check out my Market Statistics. You can follow a specific zip code in the Cincinnati area and be updated by email with the latest data.

CNN: New home sales fall to a record low.

USA Today: New home sales drop to record low.