Thoughts on New Home Sales and Durable Goods Data 5 comments
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New home sales and durable goods orders were up sharply although as you shall see there is less there than meets the eye.
Durable Goods
I always find this number to be about the clunkiest and least reliable of the government statistics. Today’s numbers prove my point.
Overall orders for durable goods in July were up 4.9% to $168.43 billion. They had fallen in June by an initially announced 2.2% but that was revised to a decline of 1.3%. In July the transportation sector was up 14.4% driven by a 107.2% increase in commercial aircraft orders — see what I mean. Excluding transportation they were up 0.8%.
This chart from Jake at EconomPicData.com breaks down the sectors.
New Home Sales
Also ranking right up there on the unreliability scale is the new home sales report. The Census Bureau said that sales of new homes in July came in at 433,000 up 9.6% from the 395,000 figure for June but 13.4% below the July 2008 figure. They peg inventories at 271,000 which based on the current sales figures represents 7.5 months of supply.
I report these numbers mostly out of a sense of duty. Also news is slow right now so why not. I find it hard to read too much one way or the other into either report, save for the inventory part of the home sales number. It has dropped significantly and absent much new construction is getting down to normal levels. I think that inventory of both new and existing homes is going to be crucial. Both have been falling and that’s a real positive. The inventory number is what you need to focus on.
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As for the spec homes that you point to as seeing a decline in sales, most are guessing that the bulk of new home buyers have been first time buyers who are opting for stripped down smaller houses. The existing inventory tends to be bigger homes with lots of upgrades, thus out of the price range for fist time buyers.
On Aug 26 08:03 PM qqq fox wrote:
> 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 !!!
Paper contracts are a good indication of promises to build, but 2 x 4's and plywood out the door show real economic activity.
I remember the call saying it is a great time to buy and sell!
A disgusting unethical organization imo.
You guys had all the data 3-4-5 years ago that house prices were at extremely high levels to incomes but kept pimping houses.
This is non-sense that it is good that house prices go up. Why because a house has become a huge burden on american families that eat up to much of their monthly income. it's time for house prices to fall to affordable levels to local incomes where a family can pay the mtg and house expenses while saving for retirement and having some kind of life. House is a place to live and not be a big burden and a vehicle to speculate with.