CoreLogic Analyzes Geography of New Home Sales Rebound

New home sales have seen a slow recovery since reaching a trough in 2011, but the recent pickup demonstrates how underlying economic fundamentals are improving, ""CoreLogic"":http://www.corelogic.com/ says in its May MarketPulse Report.

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Since falling to a low point of 273,000 (annualized) in February 2011, new home sales have taken years to make a significant rebound.

""New home sales growth has been tepid in the first stages of the recovery because the new home market has been competing with the available supply of foreclosures and short sales,"" senior economist Sam Khater said. ""However, in the last year, as the inventory of existing homes for sale has dwindled and the supply of distressed sales has declined, homebuyers have increasingly turned to the new homes market.""

As a result, Khater says, new home sales have been on the rise nationally, though performance has been varied across different metro markets--proving ""real estate is still a local phenomenon.""

For example, Khater notes the markets that have seen the largest growth in new home sales tend to be concentrated in the West, which contains six of the top 10 rebounding [COLUMN_BREAK]

markets in new sales (four of those six are in California). Many of those markets have seen a tremendous decline in distressed sales, forcing buyers to turn to new inventory.

On the other hand, some markets can attribute their gains in new home sales to economic improvements such as employment growth.

""Salt Lake City and San Francisco both had declines in overall sales and home prices that were smaller or consistent with the national market during the bust,"" Khater explained. ""Now, new home sales are rapidly improving because general economic conditions are rapidly improving. Both markets' employment bases have increased by at least 3.5 percent in the 12 months ending March 2013, more than twice the national rate.""

What's important to remember, however, is that while improvements in sales in those markets has been faster, that's because they're working from a lower base--meaning moderate gains look bigger compared to increases in less hard-hit markets.

When breaking down markets by the actual number of new home sales, the picture changes: Texas takes four of the top 10 spots (reflecting the state's relatively healthier economy and its status as an energy hub). Look at new home sales as a share of total sales, the Lone Star State is joined by both North and South Carolina to take eight of the top 10 spots (the outliers being Oklahoma City, Oklahoma, and Jacksonville, Florida).

Regardless of the geography, Khater concludes that the rebound in new home sales, when coupled with recent yearly spikes in home prices, is welcome news in suburbs where much of the economic and mortgage distress has been concentrated.

""The new home sales recovery is acting like a virtuous and targeted economic stimulus package,"" he said.