US Realtors lower new home sales forecast

08 July 2008 18:10  [Source: ICIS news]

NAR lowers new home forecastHOUSTON (ICIS news)--The National Association of Realtors (NAR) on Tuesday lowered its new US home sales prediction for the year, citing high inventories, rising commodity prices and construction costs.

New-home sales in the US are likely to fall 32.3% to 525,000 in 2008 and decline another 3.4% next year to 507,000, the NAR said in a statement.

The outlook for new-home sales was lowered from the 529,000 prediction a month ago.

“In light of high inventory conditions, rising commodity prices and construction costs will curtail new home construction deep into 2009,” said NAR chief economist Lawrence Yun.

Housing starts, including multifamily units, will probably fall 28.7% to 966,000 this year, and then drop another 9.0% in 2009 to 879,000.

The housing industry is a key downstream consuming sector for chemicals and chemicals-based products such as roofing materials, adhesives, insulation, siding, paints and coatings, synthetic materials, polyvinyl chloride (PVC) pipes and a broad range of other construction materials.

Each new house has an average of $16,000 (€10,240) worth of chemicals, according to the American Chemistry Council (ACC).

The NAR also lowered its 2008 prediction for existing home sales from last month.

For all of 2008, existing-home sales should total 5.31m (down from last month’s prediction of 5.4m), the NAR said, and then increase 5.0% next year to 5.58m (down from last month’s prediction of 5.74m).

The association’s Pending Home Sales Index, a forward-looking indicator based on contracts signed in May, fell 4.7% to 84.7 from an upwardly revised reading of 88.9 in April, and remains 14.0% below May 2007 when it stood at 98.5.

“The overall decline in contract signings suggests we are not out of the woods by any means,” Yun said. “The housing stimulus bill that is still being considered in the Senate is critical to assure a healthy recovery in the housing market, jobs and the economy.”

Yun said location has never mattered more than in the current market. “Some markets have seen a doubling in home sales from a year ago, while others are seeing contract signings cut in half. Price conditions vary tremendously, even within a locality, depending upon a neighbourhood’s exposure to subprime loans.”

Double-digit pending sales gains in May from a year ago were noted in Colorado Springs, Colorado; Sacramento, California; and Spartanburg, South Carolina.

($1 = €0.64)

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By: Brian Ford
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