My Mortgage Blog

Though I sometimes feel like I’m hanging from a limb about ten feet above a swamp, I continue to expect the New Homes market to make significant advances. I’ll tell you why in a moment—though most readers probably already know.

My current woe is that New Home sales actually declined last month by 0.3%. While this is a very small number, it feels to me like stubbing your toe when you thought you were about to run a few miles at, for you, a record pace.

Okay—look. (Have you noticed, by the way, the politicians and political commentators say that a lot? Look. It’s a fad. Like saying, “At the end of the day…”)

At the end of the day, a 0.3% decline won’t mean much. It won’t necessarily mean that the total sales will decline again next month, and it certainly won’t necessarily mean—as many analysts have suggested—that we’re heading into another real estate slowdown (though it should not surprise us that, at this time of year, sales are off by a relatively small amount).

Start here: The number of New Home sales in August 2012 was a remarkably strong 27.7% higher than it was in August 2011. Sounds like progress to me; sounds like my limb above the swamp just may hold.

Further, Mark Fleming, the chief economist for CoreLogic, pointed out that a 0.3% decline in August meant that the big gains in July held up quite well. We seem to have risen to a new, higher limb on the tree to which I cling.

And why, you may ask, am I clinging to the limb today when I could just wait until New Home sales either rise in an obviously sustainable way or break and plunge into the swamp. Personally, I like the first possibility; I think there may be a lot of money to be made over time by those who buy new homes before their prices start to rise further.

The median price in a new home sale in August, after all, rose by a whopping 11.2%, moving it to $256,900, its highest level since March 2007. We still have about a 4.5 month inventory of new homes for sale, too, which means prices are likely to continue rising for the time being.

And that, after all, is the major issue here. In most areas of the nation, we are so woefully behind in the needed building of new homes—both single- and multifamily residences—that there appears to be (to this dangling observer, at least) a tremendous likelihood of a surge in construction. At least, a mild surge.

Then, we could all step away from our desks for a moment and declare, “Look, we were right all along.”

There are many more reasons that New Homes may stage a very meaningful recovery in the coming months and years. Notable among them is that New Homes can be built with an intriguing array of new features that can only be retrofitted into older homes at much expense. New Homes are very likely to show us many things about the future of housing.

Of course, there is no guarantee that the public will take to these new features, but

look. That’s where I’d place my bets today.