Survey: New Home Market Still Fragile

Conditions in the new home sector remain fragile, according to a survey of 306 building executives by John Burns Real Estate Consulting, Irvine, Calif. The execs said sales remained very weak in May and that prices continued to slide, and in some locations, they reported that traffic slowed in the early part of June. "They suspect the end of the spring selling season may be near," said Jody Kahn, the consulting firm's vice president. Builders also said that besides having to compete against escalating foreclosures, they must deal with appraisals that don't support sales prices. "That's a significant additional challenge," said Ms. Kahn. Nevertheless, builders in some of the most distressed market were more optimistic then they been since Burns Real Estate started the survey a year ago. Some builders also said the recent jump in loan rates is having a positive impact because it is pushing some otherwise hesitant buyers into signing contracts and locking in rates. "Clearly," the jump in rates "is not good for sales in the long term," said CEO John Burns. "But affordability remains excellent, so we don't think it will have a significantly negative impact if mortgage rates remain below 6%." Another positive note: Two-thirds of the respondents started between one to four homes in May. A total of 2,221 new home communities in 95 unique metros were represented in the survey.