Something strange is going on in the northeast. The region, which the housing bubble's construction boom largely ignored, is seeing its new home sales continue to fall while they have been rising in other regions. In June, new home sales fell to the lowest level on record in the northeast, according to data released today by the Census Bureau. What's going on there?
Here's the historic chart:
You can see a few fascinating things in this chart. First, the big increase in new home sales didn't come in the early 2000s -- it came in the 1980s. Sales did rise a bit when the housing bubble began inflate in the late 1990s, but only a bit.
But the bubble's pop in 2007 decimated new home sales in the northeast just like it did everywhere else. They were cut in half when the boom ended, from the spring 2007 to spring 2008. The home buyer credit conjured up a little bit of demand in 2009 through 2010, but sales have been declining since the credit expired a year ago.
In June, just 16,000 new homes were sold in the northeast. May provided just 19,000. You can see from the chart that sales are trending down especially since late 2010, other than a blip in January.
To compare this with what's going on in other regions, here's a bonus chart that breaks out the numbers since 2000:
The first thing you probably noticed is the differing paths of these four regions. In a sense, you can sort of see four different bubbles being inflated. But the northeast's barely got any air -- particularly compared to the west and south. As a result, it didn't have as far to fall.
To be sure, new sales aren't soaring anywhere. But those other three regions aren't continuing to break through to new lows like in the northeast. The reason for this disparity isn't clear.
This could be an issue of preference. Perhaps the northeast is offering good deals on existing home just like everywhere else, but wealthier buyers there don't have the preference for new homes exhibited by wealthier buyers in other regions. Northeasterners might appreciate deals on charming older homes, rather than choosing to shell out a premium to build a new house.
Another possibility could be population growth. If the south and west, for example, continue to grow faster than the northeast, then perhaps the proportion of buyers who want new homes has declined everywhere, but the number of new buyers is still growing outside of the northeast.
The explanation could also be that deeply entrenched builders in housing boom regions must continue to make a living. All those builders might be selling new homes at competitive prices in those regions. But in the northeast, a smaller group of home builders is managing to get by even as new homes decline.
Or maybe some other reason explains this trend. Feel free to post your alternate theories in the comments.