For months, we’ve watched analysts swing and miss as they try to predict the bottom of the housing crash. We still aren’t seeing any sign of a turn in existing home sales, but Friday’s new home sales numbers were actually encouraging.
New home sales are a small slice of the overall housing market, and. unlike existing homes, they have a built-in supply constraint: When times get rough, builders stop building so many (this has happened in spades). But, still, this is good news. Asha Bangalore of Northern Trust:
Sales of new homes increased 0.6% to an annual rate of 530,000 in June, after a downwardly
revised decline of 1.7% in May. Estimates of new home sales during March – May were revised
up noticeably. The upward revision and small decline, on a monthly basis, are both positives. On
a regional basis, sales of new homes rose in the Northeast (5.3%) and Midwest (+2.5%) but fell in
the South (-2.0%) and West (-0.9%).
On a year-to-year basis, sales of new single-family homes fell 32.9% in June, a smaller decline
compared with the prior months (see chart 2). This is the second positive aspect. The largest
decline in the current cycle appears to have occurred in April 2008 (-40.96%).
Other positive aspects of Friday’s report:
- Inventories down to a 10 month supply from 11.2 months in March (the cycle peak)
- The number of new homes completed has now turned negative–down 6.1% in May. Supply (of new homes) is therefore now shrinking.
- The median price fell only 2% year over year, versus 7% in May and 12.7% in March.
- The percentage fall-off from the peak of the market (June 2005) is now narrowing. We’re 61.8% off the peak (1.389 million units), versus dwn 63.1% in March. This rate of decline is far beyond the average cyclical decline from 1969-2001.