Northeast Falls Behind in Home Sales
DESPITE low interest rates and falling prices, new-home sales in the Northeast are lagging behind the rest of the nation.
In September, nationwide new-home sales increased 21 percent from August. In the Northeast, however, new-home sales decreased 7 percent during the same period.
While manufacturing and services have picked up in the Northeast, new-home sales have not responded, says David Lereah, chief economist at the Mortgage Bankers Association in Washington. Since July, the average home price in the Northeast has dropped from $142,500 to $137,500, Mr. Lereah says, another factor that should have spurred sales.
But new-home sales are not necessarily as strong an indicator of the health of the housing market as sales of existing homes, says John Dulczewski, spokesman for the Massachusetts Association of Realtors (MAR). ``New-home construction in Massachusetts hasn't been that significant a player in the market since the late 80s,'' he says.
During that time, construction of homes in Massachusetts outstripped demand. In the early 1990s, the market experienced a correction. Now, Mr. Dulczewski says, existing home sales are healthy, even though sales of new homes have decreased. In Massachusetts, third-quarter sales of existing single-family homes were up nearly 18 percent from last year - the highest level in more than five years.
``Buyers were out in record numbers this summer, and the result was a volume of home sales reminiscent of the late '80s,'' says MAR president Edward Ramey.
Industrywide first-time buyer programs and increased consumer confidence are encouraging sales in New England, says John Jackson, New England director of BancBoston Mortgage Corporation, a Bank of Boston subsidiary. But slow economic recovery and the decrease in new-home sales are sending a ``mixed message,'' he says. Despite a decrease in unemployment in Massachusetts, ``this does not immediately translate into mortgage loans,'' Mr. Jackson says.
Corporate restructuring and defense cutbacks have hit the Northeast especially hard, says Stanley Doubinis, an economist for the National Association of Home Builders in Washington. He says he does not expect home sales in the Northeast to recover before the end of the century to the record levels of the 1980s. ``The fundamental income growth just isn't there,'' he says.
Cyclical recovery from the recession will help the Northeast, but globalization and changes in corporate structure will probably outweigh the cycle, Mr. Doubinis says. New York and Boston now compete with emerging financial centers such as Charlotte, N.C., in addition to long-time competitors like London and Toyko.