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New home sales, home prices and consumer confidence down

BY HBSDEALER Staff

Sales of new homes fell 2.5 percent to 512,000 units in May from 515,000 units the previous month, the Commerce Department reported June 25. At the same time, the median price of a new home sold in May was $231,000, which reflected a 5.7 percent decline from a year ago.

May’s results represented the sixth time in seven months that sales of new homes declined.

While builders were able to reduce the number of unsold homes by 16.9 percent to 453,000, the inventory of new homes rose from a 10.7 months supply in April to a 10.9 months supply in May.

“Home builders have been doing everything they can to limit the production of new units and move existing inventory, but it hasn’t been enough to make a significant dent in the backlog yet,” said David Seiders, chief economist at the National Association of Home Builders.

The West was the hardest-hit region, with new home sales falling 11.6 percent. Sales dropped 7.9 percent in the Northeast, but increased in the Midwest (5.1 percent) and in the South (0.4 percent).

News of declining new home sales came a day after the release of the Standard & Poor’s/Case-Shiller Index, which indicated that existing-home prices across 20 major U.S. cities have dropped a record 15 percent in the past year and are back to where they were in the summer of 2004.

Prices in the 20 cities — down 17.8 percent from the peak two years ago — were lower in April than they were a year earlier in all 20 of the major metropolitan areas as tracked by the Case-Shiller index.

Las Vegas, Miami and Phoenix saw the biggest declines, with prices falling by 26.8 percent, 26.7 percent and 25 percent, respectively. Los Angeles, San Diego and San Francisco were close behind with respective declines of 23.1 percent, 22.4 percent and 22.1 percent.

The areas least affected were Charlotte, N.C., which slipped 0.1 percent, and Dallas, which declined 3.4 percent.

It was also announced on June 24 that the Conference Board Consumer Confidence Index, which declined in May, had fallen further in June. The Index now stands at 50.4, down from 58.1 in May.

The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.

“This month’s Consumer Confidence Index is the fifth lowest reading ever,” said Lynn Franco, director of the Conference Board Consumer Research Center. “Consumers’ assessment of present-day conditions continues to grow more negative and suggests the economy remains stuck in low gear.”

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Costco eyes Harlem location

BY HBSDEALER Staff

Home Depot may back out of a planned retail development on the Upper East Side of New York City, according to a story in the Daily News. Costco chairman Jeffrey Brotman told the newspaper that his company was “in talks” with Home Depot about subletting a 110,000-squre-foot space on FDR Drive between 116th and 119th Streets.

The Atlanta retailer signed a lease several years ago to occupy the ground level of a five-story project called East River Plaza. The second level will hold a Target store, and Best Buy will be the tenant for part of the third floor.

Originally scheduled to open in the fourth quarter of 2008, the 485,000-squre-foot shopping center, which sits on six acres, has stalled over financing issues. The new projected opening is October 2009.

Home Depot already has two locations in Manhattan.

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Report: China’s retail growth prospects strong

BY HBSDEALER Staff

In spite of short-term pressures such as inflation and heightened nationalism, China can expect double-digit retail sales growth in the next five years, according to a report from TNS Retail Forward. The consultants see the retail market in China to increase to $1.4 trillion by 2012, surpassing Japan as the second largest retail market in the world. The largest market is the United States.

The total retail market in the United States in 2007, excluding food service, was $4.0 trillion, according to the Commerce Department’s Annual Retail Trade Survey.

“The continued entry of new retail banners is evidence that China remains one of the best retail opportunities in the world, with strong growth forecast across retail categories,” commented Frank Badillo, senior economist and manager of the company’s Global Retailing Program. 

The findings are part of TNS Retail Forward’s latest study, China’s Retail Landscape. Contributing to a tougher operating environment and some consolidation in the near term are: inflation and speculative pressures, growing government emphasis on product safety and environmental regulation, and heightened Chinese nationalism.

Regardless, a continued influx of new retail banners, with particular interest among upscale apparel retailers, suggests there remains opportunity for entry into China. The continuing opportunity in China also is evident in the stepped-up expansion plans by a broad spectrum of retailers.

China’s leading domestic retailers remain focused on aggressive expansion, but they are also showing the effects of competitive pressures. Some of these pressures are most evident at retail conglomerate Bailian Group and consumer electronics retailer Gome, according to the firm.

Foreign retailers in China continue to plan for aggressive expansion but more often have fallen behind plan. “Carrefour’s small-format focus has helped give it an advantage over Wal-Mart’s big-format focus,” according to Badillo. “While Taiwan-based RT-Mart, a partner of Auchan, has quietly built up a sizeable presence in China, Tesco is only now gearing up its expansion. Kingfisher is reorganizing, and Best Buy is ramping up slowly,” he added.

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