New home sales rise 2.4% in July ... thanks to downward revisions

New home sales figures for July have been released by Census. Here's a breakdown of the numbers ...

* Sales rose 2.4% to a seasonally adjusted annual rate of 515,000 in July. That was "better" than the average forecast, which called for a 0.9% decline in sales. But the only reason sales rose on a percentage basis was because last month's reading was revised lower -- to 503,000 units from a previously reported 530,000. May's reading of 533,000 sales was also lowered to 514,000. Don't you just love economics?

* Regionally, sales surged 38.9% in the Northeast and 9.9% in the West. Sales fell 2.5% in the South and 8.2% in the Midwest.

* The supply of homes for sale continues to decline, by 5.2% to 416,000 units in July from 439,000 in June (previously reported as 426,000). Inventories were down from 539,000 a year earlier. On a months supply at current sales pace basis, inventory fell to 10.1 months from 10.7 months in June (previously reported as 10). That was also up from 8.3 months in July 2007.

* Median home prices were essentially unchanged at $230,700 in July vs. $230,100 in June. They were off 6.3% from $246,200 a year earlier.

So what's the story on new home sales in July? They rose more than 2%, but only because June's figure was revised sharply lower. May's reading was cut as well. Stepping back and looking at the bigger trend, we're essentially churning around the 500,000 to 550,000 unit area when it comes to the sales rate and should remain in that ballpark for some time.

Home prices continue to fall from year ago levels, down a bit more than 6% in July. The bright spot in the new home market remains the inventory picture. Builders have done a much better job of bringing down the supply of homes for sale than their counterpart sellers in the existing home market. Supply is down to 416,000 units, compared with a peak of 572,000 in July 2006. That said, we still have almost 100,000 more houses on the market than normal. So we should expect to see construction activity remain weak into 2009, and prices remain under pressure.