New Jersey New Home Forecast

From the Asbury Park Press:

Sharp drop seen in N.J. housing starts

Housing starts in New Jersey are forecast to drop nearly 20 percent this year, according to the head of the state home builders association, but the market could show signs of improvement in the second half of 2007.

Patrick J. O’Keefe, chief executive officer of the New Jersey Builders Association, expects about 27,000 houses to be built, compared with the 33,400 that were built in 2006 and the 37,980 that were built in 2005.

“We are now at the nadir,” O’Keefe told a meeting of the Shore Builders Association of Central New Jersey on Wednesday night. “We are now starting to see a bottom form.”

The sale of new houses is linked to the existing-home market because most new houses are bought by people who have to sell their old houses before they can buy new ones.

But sales of existing homes slumped in 2006. Prices got too high for a lot of buyers, and when homeowners who wanted to move up into new houses couldn’t sell, the new-home market suffered.

For builders to sell houses, there has to be some changes in the existing-home market, O’Keefe said.

“They (homeowners) continue to believe they are going to get what their neighbor across the street got in the first half of 2005. That market is not there anymore,” O’Keefe said. “Individual sellers are only now beginning to understand that the market has changed.”

In the second half of the year, O’Keefe said he expects new-home buyers who have adjusted their expectations of how much they will receive for their current homes will come back into the market.

“2007 is not going to be a great year, but it is a year where we are going to see a turnaround,”

O’Keefe said. “For those who are nimble, for those who are competitive, for those who are creative, it should also be a year of profit.”

The year’s forecast of 27,000 new homes in New Jersey is the level of new construction in 2001, O’Keefe noted.

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1 Response to New Jersey New Home Forecast

  1. New-home sales fell to 16-year low in 2006

    But December uptick may signal bottom for housing market
    The Associated Press
    Updated: 10:26 a.m. ET Jan 26, 2007

    WASHINGTON – Sales of new homes plunged in 2006 by the largest amount in 16 years as the nation’s housing industry suffered through a sharp contraction after five boom years.

    The Commerce Department reported that sales of new single-family homes totaled 1.06 million units for all of 2006, down 17.3 percent from the all-time high for sales of 1.28 million units set in 2005.

    After setting sales records for five straight years, sales of both new and existing homes suffered sharp declines last year, and that has caused ripple effects throughout the whole economy.

    Last year’s plunge in new home sales was the biggest drop since a 17.8 percent drop since the recession year of 1990. Sales of existing homes fell by 8.4 percent to an annual rate of 6.48 million units, it was reported Thursday. That was the biggest decline in the sale of previously owned homes since 1989.

    Economists believe the housing industry will undergo further downward pressure this year as builders continue to slash production in an effort to get control of near-record levels of unsold homes.

    However, there have been some signs that the steep slide in housing may be coming to an end. For December, new home sales were up 4.8 percent, the second strong monthly gain after a 7.4 percent rise in November.

    While those increases were better than expected, analysts cautioned that they were influenced by unusually warm weather in those two months.

    The median price of a new home sold in 2006 was up by 1.8 percent from 2005 but that price gain was far lower than the 9 percent jump in new home prices in 2005.

    New home sales were up in all parts of the country in December except the West which posted a 4.4 percent drop. Sales rose by 27.3 percent in the Northeast, 26.6 percent in the Midwest and a much smaller 0.3 percent in the South.

    Separately, the Commerce Department reported that orders to U.S. factories for big-ticket manufactured goods rose in December by the largest amount in three months, led by a huge jump in demand for commercial aircraft and the biggest increase in orders for cars and trucks in more than two years.

    New orders for durable goods rose 3.1 percent last month to a seasonally adjusted total of $221.9 billion. The gain followed a 2.2 percent November increase and was the strongest showing since an 8.7 percent September advance.

    Orders for commercial aircraft surged by 26.5 percent, reflecting the sizable 212 plane orders that Boeing Co. booked during the month. There also were gains in a number of other industries, providing evidence that manufacturing is working its way through last year’s economic slowdown.

    The auto sector, which struggled last year with rising gasoline prices and stiff foreign competition, saw a 6.8 percent rise in orders for vehicles and parts, the biggest one-month gain since August 2004.

    Excluding transportation, orders for durable goods posted a solid 2.3 percent increase, the best showing in this category since last March and much better than analysts had been expecting.

    For all of 2006, new orders rose by 7 percent, a slight slowdown from an 8.6 percent increase in 2005. Orders had risen by 6.9 percent in 2004 after having fallen in 2002 and 2003 as the country was struggling to emerge from the 2001 recession. Manufacturing was the hardest hit sector in the last downturn.

    Economic growth slowed to a lackluster 2 percent in the July-September quarter, raising concerns that the steep slump in housing could trigger an outright recession.

    However, in recent weeks a number of reports have shown the year ended with stronger-than-expected activity, easing worries about such a general slowdown.

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