July New Home Sales were a pleasant surprise, but ...
* Sales rose 2.8% to a seasonally adjusted annual rate of 870,000 from a revised 846,000 SAAR in June (previously reported as 834,000). That was better than economists' forecasts for a 1.7% decline to 820,000. On a year-over-year basis, July sales were down 10.2% from 969,000 in July 2006.
* For-sale inventory came in at 533,000 new homes. That was down slightly from 538,000 in June (previously reported as 537,000) and down 7% from 573,000 in July 2006. On a months supply at current sales pace basis, inventory was 7.5 months, down from 7.7 in June (previously reported as 7.8), but up slightly from 7.4 a year earlier.
* Median prices rose 3.9% to $239,500 in July from $230,600 in June (previously reported as $237,900). Prices were up 0.6% from $238,100 in July 2006.
It's not very often we get good news on housing. But the July new home sales figures were a pleasant surprise. Sales rose (vs. forecasts for a decline), while for-sale inventory dipped and prices bounced.
What's not to like? Glad you asked. These numbers are "pre-crunch." We all know the mortgage market began melting down at the end of July and into August. So future home sales numbers will look worse ... potentially much worse. Census figures also fail to capture the impact of order cancellations -- when a previously contracted buyer backs away, the data is not adjusted for that. Since the major home builders are reporting cancellation rates in the 20% - 40% range, ACTUAL, closed home sales are lower than what is being reported.
So feel free to throw a handful of confetti in the air. But keep those mourning dresses and dark suits handy -- because the August and September data might be more fit for a funeral.