Existing Home Sales Rise in July
Another rise in existing home sales and Toll Brother’s impressive results show housing is finally in recovery. Daniel Gross reports on the latest developments.
For nearly half a decade, the housing sector has been a house of pain: plummeting prices and sharp declines in housing sales and housing starts. But throughout 2012, signs have emerged that housing is turning around. Through the first seven months of 2012, we’ve sustained growth in the volume of sales of existing and new homes, and in housing starts. Of course the level of activity is far below that of the 2006 peak (duh! We had an epic, once-in-a-century bubble). But those who dismiss any positive housing news are missing an important dynamic in the economy.
Wednesday, we received two new pieces of information that confirm this trend. The National Association of Realtors reported that existing home sales rose 2.3 percent in July from June, to an annualized pace of 4.47 million. More significantly, the volume of sales was up 10.4 percent from July 2011. That’s good news. More volume means more work for real- estate brokers, mortgage brokers, appraisers, and movers.
More good news? Prices rose. The median price of a home sold in July was $187,300. That’s down slightly from June. But it represents a 9.4 percent from July 2011, and the fifth straight month over year-over-year price increases. In 2011 even as the number of homes sold increased, prices continued to fall. It’s now looking, however, that 2012 will see a rise in both the number of homes sold and the price of the typical home sold. For the past several years, declining home values have acted as a massive weight on the economy. No longer.
There are also signs that the wave of distressed selling that helped push prices lower throughout 2010 and 2011 is ebbing. In July, foreclosures and short sales accounted for 24 percent of sales—down from 29 percent in July 2011. And as NAR reported, “First-time buyers accounted for 34 percent of purchasers in July; up from 32 percent in June; they were also 32 percent in July 2011.”
On Thursday, the Census Bureau will report data on new home sales—a much smaller market than the existing home sales market. But it’s still important because it speaks to the strength of the vast construction market. On Wednesday we got a preview of how one home-builder has been doing. Toll Brothers, the McMansion specialist that soared in the bubble and was laid low by the crash, reported its earnings for the most recent quarter. And it was an across-the-board success.
Compared with the prior year’s quarter, revenues were up 41 percent and the number of units it delivered rose 39 percent to 963. The average price of a home it delivered was up 3.4 percent from the year before. And its employees are likely to be busier in the coming months. “Net signed contracts of $674.4 million and 1,119 units rose 66 percent in dollars and 57% in units, compared to FY 2011's third quarter.” Toll, which was stuck with unsold inventory a few years ago, has a backlog of 2,559 units, up 44 percent compared with the year-ago quarter. As CEO Douglas Yearley put it: “We are enjoying the most sustained demand we've experienced in over five years.”