money Housing expert: New home sales ‘hit the bottom in July’
The market for new homes is slowly rebounding as underlying buying demand remains strong, according to one expert.
"I think we hit the bottom for new home sales in July at about 543,000," John Lovallo, a homebuilder and equity research analyst at UBS, told Yahoo Finance Live (video above). "And I think that we're going to slowly get better and better here."
New units sold remain below what builders saw a year ago, but sales have gradually climbed back up in the last couple of months. For instance, 640,000 new units sold in November, a rebound from 543,000 in July when sales were down 34% from January’s high of 831,000 units.
And while builders’ confidence in the market has worsened every month this year, housing stocks have recently outperformed the S&P 500 index.
"Since November, which is the start of this sort of seasonal hope trade, stocks are up about 13% versus the S&P, up about, call it 1%-ish," Lovallo said. Still, the market “is going to be a tough ride” as mortgage rates remain high.
Underlying demand remains
Even with the recent cooldown, Lovallo said those between the ages of 30 and 35 will continue to prop up the market because they want to settle down.
"There's a strong wave of millennials coming through the pike that are reaching prime home-buying age," Lovallo said. "This first-time buyer is very need-driven, need-based… if they can buy a home, they will."
Last year, 29% of millennials planned to purchase a home within 12 months, and potential buyers were actively searching for houses throughout all regions of the United States. Nearly half of millennials between 32 and 41 were first-time buyers, according to the National Association of Realtors.
Not like the 'global financial crisis
Many experts believe today's housing downtown is unlike the one that preceded the Great Recession. Lovallo agreed.
"We think that supply is way too tight," he said, noting price drops of 20% to 30% aren’t likely because there’s not enough housing inventory to meet the pent-up demand.
"There were 10 months of supply of inventory on the ground during the global financial crisis. There are three months today," Lovallo said. "So we're way, way too low on the supply side.”
Rebecca is a reporter for Yahoo Finance.
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