WASHINGTON (AP) -- The Commerce Department reports on sales of new homes in September. The report will be released Friday at 10 a.m. Eastern.
SALES DOWN: Economists forecast that sales of new homes tumbled 7.1 percent last month to a seasonally adjusted annual rate of 468,000, according to a survey by the data firm FactSet.
That would mark a sharp reversal from August, when sales climbed 18 percent to an annual pace of 504,000. Much of August's increase came from new homes being purchased in the West, gains that are unlikely to be repeated in September.
HOUSING BUST LINGERS: Housing has struggled fully rebound since the recession, even though the U.S. economic recovery began more than five years ago. The housing bust resulted in a surplus of newly built homes, leaving construction crews without much of a reason to break ground on new developments. Construction and buyers of new homes have trickled back, with sales of new-homes on pace to improve 7.3 percent this year to 460,500. But new-home sales remain drastically below the annual rate of 700,000 during the 1990s.
More than 8 million homes are "seriously underwater," representing 15 percent of all properties with a mortgage and roughly $1.4 trillion worth of negative equity, according to the housing data company RealtyTrac. The lasting damage from the housing bust continues to weigh on the market, preventing some homeowners from upgrading to larger houses and limiting the options of buyers.
Some of the financial pressures on homebuyers are starting to ease, yet it's unlikely that will boost sales of new homes in the final months of this year.
Over the past two weeks, federal regulators have unveiled plans to loosen down payment requirements and mortgage rates have tumbled below 4 percent. Along with a slowdown in price growth, these factors could eventually help usher more buyers into the real estate market.
Average rates for a 30-year mortgage fell to 3.92 percent from 3.97 percent last week, the mortgage company Freddie Mac reported. That is the lowest level since June 2013 and marks a solid decline from average rates that began the year at 4.53 percent. When rates fall, it becomes cheaper for people to borrow and makes homes more affordable.
But builders have yet to respond by ramping up construction of single-family houses.
Almost all of the 6.3 percent growth in housing starts last month came from apartments and multi-family construction, the Commerce Department reported. Starts for single-family houses rose just 1.1 percent in September compared to the prior month.
Increased apartment construction reflects a broader shift toward renting. Many would-be buyers endured the loss of their financial savings and potentially their jobs during the recession. As wages have barely surpassed inflation during the recovery, many Americans lack the income needed to buy a house, forcing more of them to rent.
The troublesome housing landscape is illustrated in an analysis from the real estate data firm Trulia, which found that rentals are still going strong even though current mortgage rates have made it 38 percent cheaper to buy a home rather than renting, based on a seven-year timeframe.
"Consumers tell us that the main obstacle to homeownership is the down payment," said Jed Kolko, chief economist at Trulia. "For those would-be homeowners —especially first-timers without savings or equity from another home — a low-down-payment mortgage might be the only option."
- Real Estate