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Builder Incentives Kept April Home Sales Strong
Monday, June 1, 2020
As was reported last week, new home sales in April
were much, much better than expected. There may or may not be a cause and
effect going on here, but two recent posts in the National Association of Home
Builders' (NAHB's) Eye on Housing blog indicate that builders are at
least trying to preserve some market momentum. While builder confidence cratered in April and housing
starts declined, Rose Quint reports that there is anecdotal evidence that
builders were lowering the prices of newly constructed homes in April and that more
than half report making sales accommodations in May. The latest NAHB/Wells Fargo Housing
Market Index (HMI) survey shows that about 22 percent of builders cut home
prices in April 2020 in order to bolster sales and/or limit cancellations.
Regionally, builders in the South (26 percent) and Midwest (23 percent) were
the most likely to have reduced prices, compared with much smaller shares in
the West (13 percent) and Northeast (12 percent). Again, there may be no
relationship, but the Census Bureau reported that new home sales were up 2.4
percent in both the South and Midwest and down 6.3 percent in the West compared
to March. However, sales were also up 8.7 percent in the Northeast, the region
with the lowest reported incidence of price cuts.
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