New Construction Markets Stabilizing
Monday, January 25, 2010
2009 has been a year of mixed signals to the new home market. In our regional markets we started to see daylight with some areas showing actual increases in overall unit sales, while most areas that showed decreases in sales experienced smaller decreases than in 2008. To be certain, we are not experiencing a “boom” time yet, but the signs of stabilization are certainly present. Inventories have been pared to levels where absorption rates are returning to 2005 -2006 levels. Prices have not been severely impacted either. In fact, one segment of the Quad City market had a 7% increase in the average new home sales price over the last year.
The Quad City area continues to see new construction very differently depending upon whether you are in Scott County, IA or in Rock Island County, IL. The Illinois side saw its market share of new construction sales dip below the 20% mark again in 2009, even though it experienced a slight increase in unit sales. Overall unit sales fell 15% from 2008 levels in the Quad Cities. House sales took the bulk of the loss, as overall condo sales were only down 2% from 2008. Since 2004, house sales have fallen from 67% of unit sales to 61% of sales in 2009. Inventory levels have stabilized and appear well balanced with the price points of recent sales. The over-development of residential building lots in some areas of this market has left a legacy that is yet undetermined. Will the need to liquidate lots lead to some lower housing prices or just slower absorption rates? The coming months will reveal the strategies of lenders and developers alike.
Current sales patterns reveal pockets of success at various price ranges, but many terrific areas are going unnoticed by consumers who, even in the face of upcoming deadlines for tax and other incentives to buy, do not seem to feel any great sense of urgency. Coupled with the fact that buyers can choose from a wide variety of settings, home styles and prices, the current tax incentives and still low interest rates will hopefully be enough to “thaw” the winter sales chill and bring buyers back into the marketplace in time to take advantage of these conditions.