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Could the Bottom Be Near?
Latest New Home Report from the Building Industry Association
and Hanley Wood Market Intelligence Shows Sales Increases in All LA County Submarkets Except for West L.A.
Speculative Inventory Also Continues to Decline
May 7, 2009 (SANTA CLARITA, California) – Due to a combination of federal and state tax incentives, low interest rates and fewer discounted foreclosures than in other parts of California, sales of new homes in metropolitan Los Angeles County continued to rise for the second consecutive month, which some analysts think could mean that the bottom for new home sales occurred in January of 2009.
“If sales continue to rise in April – which by all anecdotal accounts I’m hearing they did – then the numbers will show a three-month trend upwards,” said Greg Doyle, Regional Director for Hanley Wood Market Intelligence, which conducts monthly surveys of new home communities. “It still may be too early to call, but all the signs so far are positive.”
The most recent monthly report, which is a cooperative effort between Hanley Wood, the Building Industry Association – Los Angeles/Ventura Chapter (BIA/LAV) and the real estate advisory firm MetroIntelligence, shows that sales rose at new home communities in the Santa Clarita Valley, the San Fernando Valley, the San Gabriel Valley and the South Bay. They also rose in both the western and eastern submarkets of Ventura County, leaving West Los Angeles – which experienced a heightened level of auction activity in February that skewed the numbers upwards – the only submarket to report sales declines from February. Sales also rose from the same month of 2008 in the San Fernando Valley, the San Gabriel Valley and in the South Bay.
Holly Schroeder, the BIA’s CEO, thinks that the special California tax incentives for buying a new home have been a driving force for the recent sales rebound. “First-time homebuyers purchasing a new home can take advantage of both the $10,000 state credit and the $8,000 federal tax credit, which is a huge incentive to buy a new home,” she advises, although there are some caveats to qualify. A homebuyer who qualifies for both credits (up to $18,000) must buy a new home, can't have owned one in the last three years, must have an individual annual income of $75,000 or less, and must live in the home for at least three years.
According to Patrick Duffy of MetroIntelligence Real Estate Advisors, who analyzed the Hanley Wood data for the BIA, in some cases new home sales are also rebounding as the quality of foreclosures declines. “When you’re faced between a foreclosure which has been vandalized and features a brown lawn, a mosquito-infested pool and no more copper wiring, if the price is competitive it’s easy to see why a buyer might prefer a new home,” he says. “Add in the extra tax incentive from the state, and new homes suddenly become much more competitive.”
Additional information on new home prices, average square footage, value ratios and speculative inventory for the various submarkets in the two counties may be referenced in the attached reports.
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About BIA/LAV
The Building Industry Association / Los Angeles Ventura Chapter (BIA/LAV) is comprised of approximately 650 companies involved in every aspect of building homes and creating thriving communities for a growing and diverse population. BIA/LAV exists to provide leadership on public policy issues that promote building quality communities for the region’s growing population, to increase the public appreciation of the importance of housing and those who provide it, and to facilitate improved business opportunities for its members. More information is available on the Association's Web site, www.bialav.org.
About MetroIntelligence Real Estate Advisors
MetroIntelligence Real Estate Advisors, a Division of Beacon Economics, is a boutique consulting firm which, through its variety of alliance partners, helps builders, developers, lenders, investors, and public agencies identify, analyze and manage development projects that best target customers and maximize investments. With expertise in virtually all land use and product types, founder Patrick Duffy has overseen consulting engagements throughout the U.S. and Mexico on over $40 billion of new development. More information is available at www.metrointel.com or by calling 888-82-DEVELOP.
About Hanley Wood Market Intelligence
Hanley Wood Market Intelligence (HWMI) collects data from new for-sale production subdivisions of 10 units or more on a monthly basis. HWMI Net Sales represent sales contracts signed during the period indicated minus any reported cancellations. Median and Average Prices are based upon the minimum asking price of the plans sold during the period and do not include the cost of any lot/view premiums or upgrades. Because this data is collected monthly and based upon sales contracts that represent future closings, HWMI data is the most forward-looking data source available for new home information in the state of California. |
