October new home sales: Outlook not so good
* Sales rose 1.7% to a seasonally adjusted annual rate of 728,000 from a revised 716,000 SAAR in September (previously reported as 770,000). On a year-over-year basis, sales were down 23.5% from 952,000 in October 2006. It's worth pointing out that the sales figures keep on getting revised lower. For instance, August's sales rate was originally reported at 795,000. That was then cut to 735,000 in last month's report and now, 717,000.
* For-sale inventory came in at 516,000 new homes. That was down 2.3% from 528,000 in September (previously reported as 523,000) and down 6.7% from 553,000 in October 2006. On a months supply at current sales pace basis, inventory was 8.5 months, down from 9 in September (previously reported as 8.3), but up from 7.1 a year earlier.
* Median prices off 8.6% to $217,800 in October from $238,400 in September (previously reported as $238,000). Prices were down 13% from $250,400 in October 2006, the sharpest drop since 1970.
The existing home sales data yesterday was unequivocally bad. The new home sales figures are a bit more mixed. The bad news? Sales are running around the lowest level in more than a decade. Moreover, prices are falling at the fastest rate since Richard Nixon was president and the Vietnam War was raging. The good news? Deep cutbacks in home construction are making a dent in for-sale inventory. We're still oversupplied, but a little less so.
Unfortunately, there are signs the broader economy is starting to follow the housing market south. Jobless claims are at a nine-month high, retail sales growth is nothing to write home about, and banks are getting stingier with loans. Those forces should conspire with high inventory levels to keep the housing market on the rocks until later in 2008 or 2009.