Regarding cancellations, via Calculated Risk:
New home sales rose a surprising 4.1 percent in August — May, June and July sales were revised down — while existing home sales showed a scant 0.5 percent drop. The reports inspired comments (hope?) that housing might be stabilizing.
Simply put, cancellations are rising, and they aren’t being captured in the aggregate statistics because of the way the survey is designed. Hence, sales are being overstated and inventories understated.
We know from big builders that cancellation rates are rising. Seiders says the rate “has roughly doubled over the last year” and is “more serious at the big companies.”
Here is one of the primary differences between the CharlAlbemarle/Central Virginia market and the rest – we have only one big builder (Ryan Homes) in our market. I have heard of markets where folks are walking away from 10% down payments – sometimes $50K! when the home they are contracted to purchase (example: $500k purchase price) is sitting next to one that is for sale for $425k. Even if they lose their deposit and purchase the one next door, they still save a net of $25K!
So far, the Charlottesville market remains a bit too small for economies of this scale …
Update 10-03-06: More on data interpretation and reading beyond the headlines from the Big Picture.
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