New Home Sales Numbers Surprise

The latest data on new home sales just came in, and it is considerably more positive than expected. Sales rose sharply in July, during a period of the year when they typically decline. Sales came in at a seasonally adjusted annual rate of 433,000, which is still extremely low from a historical perspective. As Calculated Risk notes, that's the third worst July for new home sales since records began in 1963.

But the report is nonetheless quite good when inventory is taken into account. Months of supply fell dramatically in July, to 7.5 months, and while it remains above historical norms it seems likely that supply will continue to drop in coming months, given the near total absence of new home building activity over the past year. Inventory is at a bullish level, for homebuilders and markets overall. The chart of the day is below (click to enlarge), courtesy of Calculated Risk.

Of course, inventory levels will vary considerably across metropolitan areas. But this is a very interesting piece of information.

original post

Comments

[Greater fool]

I'm not convinced.... The median selling price is just over $200K, and the lower end is being propped up by the $8000 new home buyer incentive.. How will things look when that goes away?

2009 Aug 26 02:11 PM

[enigmaman]

Sounds like good news until its not so we shall see, with almost 40% of re sales under 100,000 thats not the move up market, its the better then rent and also the bottom feeding investor market. Builders might be selling new homes but they are competing with resale pricing, so nobody is making any money, there are builders selling at a loss just to be able to pay on their lines of credit and stay in business, how long can this last, when will the move up market come back and agree to pay sustainable market prices, builders can churn dollars for only so long, sooner or later they will be required to make reasonable profits or shut down.

2009 Aug 26 03:48 PM

[Gtarras]

being former MIT mathematician who ventured into econ later myself, i am very pissed to see this spammer hijacking this identity. this iam ned site promoter is all over the SA boards, and I call for everybody to report this activity. maybe the editors will catch up and will start blocking this spammer's website instead of IDs that are easy to create. we are on the mend. i have been cursed here for months pointing this out. with all the money the govt is throwing at the problem, it can not be any other way. we'll pay for it, but later.

As to the article, thanks Ryan. For conclusions backed by real numbers and not pure hot air hype, which been filling up SA articles and comments sections for as long as I have been frequenting the site.


On Aug 26 02:09 PM MIT mathematics & economics wrote:

> yay another housing update from our SA CNBC shill.
>
> better articles: www.iamned.com

2009 Aug 26 04:23 PM

[Donald Ingram]

With 43% of existing home sales for cash on the barrel, this tells me that most will not be owner occupied. This is the ongoing flight out of cash into hard assets. The smart money (those who own the lions share of it) is moving as quickly as possible out of cash positions and into value investments. These homes will become rental units, and the transfer of wealth from the low end to the high end will continue.
Low end buyers are losing out to cash buyers because sellers want a quick deal without having to hold debt paper. Often sellers taking lower bids from cash buyers. This is even with low end buyers using the $8,000 home buyers grant.

2009 Aug 26 04:54 PM

[Tony Petroski]

Mr. Avent. These numbers are surprising. We are a once-proud nation of about 300 million, so there's something dramatically wrong with the picture here. There should be more guys building homes.

I predict we will be a proud nation once again.

2009 Aug 26 06:14 PM

[LemonMeister]

Hurrah! The 2007 Dallas Morning News Man of the Year is working again. Even acid rain can sound promising using the right media slant. Could someone build these homes to last? Sales in a slump means the cheapest products possible. Look how your foods in the markets are now in smaller packages. You pay more for less. Make sure you hire a home inspector even on a new house - since the homebuilder was in such a hurry he forgot to put the framing in. Please pass the home builder LEMON law in your state. Look up my home builder " KB Sucks".

2009 Aug 26 06:45 PM

[qqq fox]

I am surprised no one has dug into today's new home sales report. If anyone bothers to get to page 4, they would find that sales of new homes that are finished and ready for occupancy were actually down 6%. The category showing the biggest gain, 33%, was for homes that haven't even been started yet. In other words, they are merely sales contracts that are entered into without any mortgage financing being lined up. Desperate builders will sign these no money down contracts with the understanding that nothing will happen until the buyer comes in with a downpayment and mortgage financing. That these sham deals are allowed to be counted at all shows the political clout of the NAHB. Very misleading to say the least !!!

2009 Aug 26 08:01 PM