Wheeee! New Homes Sales, Prices in Freefall

by: Barry Ritholtz

Get ready for a new round of serial bottom callers!

New Home Sales data was released Thursday morning, and it stunk up the joint. (Why are people still so surprised by this?).

Here's the SALES and SUPPLY details:

• Sales are down 21.2% in the past year;
• August's sales pace was weaker than expected;
•  The sales figures do not account for canceled sales contracts (presently running above 30%);
• The inventory of unsold homes fell by 1.5% to 529,000 -- an 8.2 month supply;
• Completed homes not yet sold rose 1.1% to 180,000 -- the first increase since May. 
Here are the PRICING details:
• The median sales price of new houses sold in August 2007 was $225,700; the average sales price was $292,000. This is a drop of 7.5%;
• This is the largest year-over-year price decline in 37 years.
• Reported sales prices do not include non-monetary incentives, such as paid real estate taxes, kitchen upgrades, installed pools, free vacations or new cars.

As we have noted many times in the past, the 8.3% drop from July to August is less than the 12.4% margin of error -- and is therefore statistically worthless. (Special kudos to Marketwatch's Rex Nutting for pointing this out). 

On the year over year data, the drop of 21.2% was in fact greater than the ±9.0%, margin of error (thats what  I call it; Commerce calls it the "estimated average relative standard errors of the preliminary data.")


Sources:
NEW RESIDENTIAL SALES IN AUGUST 2007
Residential Construction Branch
http://www.census.gov/const/www/newressalesindex.html
http://www.census.gov/const/newressales.pdf

New-home sales plunge 8.3% to seven-year low
Median sales price down 7.5% in past year, biggest drop in 37 years
Rex Nutting
MarketWatch, 10:01 AM ET Sep 27, 2007
http://tinyurl.com/2n3ddb

New-Home Sales Tumble 8.3% As Prices Decline More Than 7%
JEFF BATER
WSJ, September 27, 2007 10:03 a.m.
http://online.wsj.com/article/SB119089524605541278.html

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