New home sales fall 3.6 percent nationally 

Sales of new homes around the nation dropped unexpectedly last month as the effects of a tax credit for first-time owners that had been expected to expire in November started to wane. Large counties in Idaho, though, haven’t seen quite the same trend.

The Commerce Department says national sales fell 3.6 percent to a seasonally adjusted annual rate of 402,000 from a downwardly revised 417,000 in August. Economists surveyed by Thomson Reuters had expected a pace of 440,000.

Conversely, in the Treasure Valley, both existing homes and new homes saw increased sales (according to non-seasonally adjusted numbers from the Intermountain Multiple Listing Service). New home sales rose 3.4 percent in Canyon County and 20.9 percent in Ada County between August and September.

In the Coeur d’Alene area, the number of new homes sold stayed steady between August and September of this year and slipped 2.9 percent from last year, according to Kim Cooper of the Coeur d’Alene Multiple Listing Service.

His totals include reports from all of northern Idaho and some of eastern Washington and western Montana.

Nationally, it was the first decline since March. Sales in September were down 7.8 percent from a year ago.

The median sales price of $204,800 was off 9.1 percent from $225,200 a year earlier, but up 2.5 percent from August’s level of $199,900.

Around the nation, first-time buyers are taking advantage of low mortgage rates, discounted prices and a tax credit of up to $8,000, originally set to expire at the end of November. That’s provided a big lift to the market, with home resales climbing more than 9 percent in September, the largest amount in more than 26 years.

To keep the housing rebound going, Congress last week extended the tax credit to buyers who sign purchase papers by April 30. The new legislation also expands the credit to give a $6,500 credit to certain move-up buyers.

Supporters pointed to worrying economic data like the Oct. 27 report that consumer confidence fell unexpectedly in October. The Consumer Confidence Index, released by The Conference Board, sank to its second-lowest reading since May.

Brad Hunter, chief economist with Metrostudy, a real estate research firm, said before the extension that the effeccts of letting the credit expire would be significant.

Even with the extension, Hunter said, sales are bound to slip a bit.
 
That’s because buyers who would have bought homes early next year were enticed into making that decision sooner to take advantage of the tax incentive.

Home prices, which are down about 30 percent from the peak in mid-2006, have been on the rebound nationally, data Oct. 27 confirmed. The Standard & Poor’s/Case-Shiller home price index of 20 major cities climbed 1 percent from July to August. However, many analysts caution that home prices could decline again as unemployment and foreclosures rise.

The current recovery is “principally government sponsored and therefore tenuous,” wrote Deutsche Bank homebuilding analyst Nishu Sood in a note to investors.

And there are still many risks to the housing market.

Defaults and foreclosures are gradually shifting from hotspots like Merced and Stockton, Calif., to places like Boise and Provo, Utah, according to a report released recently by RealtyTrac Inc.

The cities with fast-growing foreclosure rates either have high unemployment or high levels of risky loans that are just starting to have problems. A new wave of loans is expected to reset to higher payments in the coming months, notably option-adjustable rate loans — a particularly toxic breed of mortgage that allowed borrowers to defer a portion of their interest payments and add them to the principal.

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