Home Builders See a Bottom

Home sales remained weak in May even as prices declined, according to a survey of more than 300 home building executives conducted by John Burns Real Estate Consulting.

The survey represented 2,221 new home communities in 95 metro areas. The consulting firm says the month’s commentary marks the most optimistic month in the survey’s year-long history, as many builders believe the market is approaching bottom.

Average net sales per community, however, slipped to 1.6 nationally. Tax credit availability and competitive low-end pricing drove the sales, according to the survey. The home buyer tax credit monetization toward closing costs on FHA loans, announced by the US Department of Housing and Urban Development, may contribute to driving sales in coming reports, as 36% of respondents expect a boost of 11% to 25% more sales per month in response to the credit monetization.

New home starts remained pressured, with 69% of respondents reported having started between one and four homes in May, and 25% reporting no starts.

“Builder contacts in a few locations are telling us that traffic and sales are off in the first weeks of June, and they suspect the end of the spring selling season may be near,” says vice president Jody Kahn.

Summer months ahead are expected to bring “escalating” foreclosure and real estate-owned pressures, the research team notes. Pricing net of incentives continued to decline in May, though at a slower rate than before, indicating a trend toward flat rather than declining overall prices.

“We’re also being told more often that appraisals are not supporting the home price. That’s a significant additional challenge,” Kahn adds.

Write to Diana Golobay.