The Supply Of New Homes For Sale Just Dropped Off A Cliff

The supply of newly-built homes for sales plummeted in April, a positive indicator for the Fairfield housing market as we head into the summer months.

It's no wonder that homebuilders are breaking new ground at the fastest clip in 2 years. 

At the current sales pace, the nation's complete supply of new homes would be sold in just 5 month's time.  That's more than double the pace of a year ago.

Also, as more good news, in terms of total housing units, the government reports that New Home Sales topped one half-million homes sold for the first time since May 2008.

It's a similar spike as within the Existing Home Sales data released earlier this week.

But before we declare the housing market "repaired in full", we have to consider a few of the reasons why home sales are charting so strongly.

The first reason is the federal homebuyer tax credit's April 30 expiration. In order to claim up to $8,000 in tax credits, home buyers must have been in mutual contract for a property before May 1. There is no doubt this contributed to a run-up in sales, especially among first-time home buyers.

The second reason is that mortgage rates have remained exceptionally low, defying expert predictions.  Low rates don't sell homes, but they do make monthly payments easier to manage for households torn between renting or buying.

And, lastly, March and April's new home sales may have been buoyed by aggressive discounting on behalf of homebuilders.  As compared to February 2010, April's average new home sale price was lower by 13 percent.  That's a sharp drop in a short period of time.

For now, though, homes are selling, supplies are dropping, and buyer interest is high. It's no wonder builder confidence is soaring.

Home Opportunity Index Ranks 225 Metro Areas For Affordability

With home prices still relatively low and mortgage rates trolling near their all-time best levels, it's no surprise that home affordability is extraordinarily high in Fairfield and most U.S. markets.

According to the quarterly Home Opportunity Index as published by the National Association of Home Builders, more than 72 percent of all new and existing homes sold between January-March 2010 were affordable to families earning the national median income.

It's the second highest reading in the survey's history.

Of course, on a city-by-city basis, home affordability varies. 

In the first quarter of 2010, for example, 98.7% of homes sold in Bay City, Michigan were affordable for families earning the area's median income and in Indianapolis, the percentage was almost 95 percent.

Indianapolis has held the top quarterly ranking for close to 5 years now.

On the opposite end of the spectrum, the New York-White Plains, NY-Wayne, NJ region earned the "least affordable" metropolitan area for the 8th consecutive quarter.  Just 20.9% of homes are affordable to families earning the local median income.

The rankings for all 225 metro areas are available on the NAHB website but regardless of where your town ranks, home affordability remains high as compared to historical values but it likely won't last long.  Home values are recovering in many markets and mortgage rates won't stay this low forever.

All things equal, buying a home may never come this cheap again. If you were planning to buy later this year, consider moving up your timeframe.