By no coincidence, the median home price dropped a 11.1% from the prior month -- the largest amount on record. The big price decline implies that builders are slashing prices to move the huge overhang of unsold inventory. Inventory of unsold new homes fell to 6.5 months (seasonally adjusted) from 8.1.
Regional sales were even more telling. As we noted earlier in the week, the greater NY region (and NYC Condo/Coop sales) are skewing the national data. Year-over-year sales in the Northeast surged 43.1%; sales were down 28.1% in the Midwest, and 25.4% in the West. Sales fell marginally (3.4%) in the South.
In the past, we have cautioned that double digit gains of new home sales are VERY unreliable monthly data points. (It is mostly due to the way the Builders self report their sales to Commerce).
Have a look at this analysis we did a few years ago: It turns out that whenever New Home
Sales jump double digits, it usually reflects a mean reversion from the prior (or subsequent) month's reportage. Indeed, over the past 15 years of data, we found that a mean
regression followed nearly every double digit monthly gains. Typically, the
subsequent month's data was significantly lowered -- flat to negative
in nearly every case:
New Homes Sales
|onth, Year||Double Digit Gain||Subsequent Month||Increase / Decrease|
|June 2003||10.7%||July 2003||(-2.1%)|
|December 2000||11.7%||January 2001||(-4.8%)|
|July 2000||11.9%||August 2000||(-4.4%)|
|November 1998||11.4%||December 1998||(-4.6%)|
|January 1998||10%||February 1998||(-0.7%)|
|March 1995||10.2%||April 1995||0.8%.|
|*February 1994;||10.82%||March 1994||8.89%|
|April 1993||16.45%||May 1993||(-10.70%)|
|September 1993;||12.56%||October 1993||(-3.03%)|
|January 1992||21.15%||February 1992||(-5.47%)|
*February 1994 was the one exception -- it was followed by strong
March and April data -- but came after January 1994, which has the
honor of being the very worst month ever in the history of the Census Construction data: Down -23.77%.
In other words, stick with the two or three month
New Residential Sales
Commerce Department Census Division
U.S. April new-home sales unexpectedly jump 16%
MarketWatch, 10:00 AM ET May 24, 2007
Home Sales Soar by Record Amount
Thursday May 24, 10:09 am ET
By Terence Hunt, AP White House Correspondent