New home sales pop in April, inventory hits lowest level ever

We just got the latest look at the new home market from the Census Bureau. Sales rose 7.3% to a seasonally adjusted annual rate of 323,000 in April from 301,000 in March. That beat economist expectations for an unchanged reading, and it leaves sales at the highest level since December.

The number of homes for sale continued to decline, falling to 175,000 from 180,000 a month earlier. That's the lowest level in the 48 years the Census Bureau has been keeping track. The "months supply at current sales pace" indicator also dipped to 6.5 from 7.2. That's the lowest since the same month a year ago. Median prices rose 1.6% to $217,900 from $214,500 a month earlier. On a year-over-year basis, prices were up 4.6%.

We got a better-then-expected pop in new home sales in April, and a continued shrinkage in the amount of supply on the market. That's something, I suppose. But industry players continue to lack confidence in future sales, and they remain extremely reluctant to build more homes. Intense competition from the used home market is the primary culprit. Until we clear the inventory overhang there, we're just not going to get a noticeable increase in construction activity or hiring. I suspect that won't happen until 2013 or 2014.

Existing home sales slip in April

Existing home sales figures for April were just released. Sales dipped 0.8% to a seasonally adjusted annual rate of 5.05 million from 5.09 million a month earlier. That missed expectations for a reading of 5.2 million, and was down 12.9% from a year earlier.

Single-family sales fell 0.5%, while condominium and co-op sales slumped 3.1%. The Midwest was the only region showing a gain (5.7%). Sales fell 1% in the South, 1.6% in the West, and 7.5% in the Northeast.

The months supply at current sales pace indicator of inventory rose to 9.2 from 8.3; that was the highest since November. The raw number of homes for sale fell 3.9% from a year ago to a still-elevated 3.87 million. The median price of a used home rose 2.4% to $163,700 from $159,800 a month earlier. But that was still down 5% from a year ago.

The latest used home sales figures confirm what we've already seen in other reports. Sales remain lackluster, inventories remain elevated, and pricing remains weak. Buyers see little reason to jump into the market, given the ongoing economic weakness and concern about the future direction of home prices.

Housing starts, permits plunge in April

We just got our latest look at home construction, and it wasn't good ...

* Housing starts plunged 10.6% to a seasonally adjusted annual rate of 523,000 in April from an upwardly revised 585,000 in March. That missed expectations for starts of 569,000. Building permits fell 4% to a 551,000 SAAR from a downwardly revised 574,000 a month earlier. That also missed expectations for an increase to 590,000.

* By property type, single family starts slumped 5.1% while multifamily starts plunged 24.1%. The permitting breakdown was -1.8% for single family and -8.8% for multifamily.

* As for the regional breakdown, starts fell 4.8% in the Northeast and 23% in the South. They rose 3.7% in the West and 15.7% in the Midwest. Permits flat lined in the Northeast, but fell 0.8% in the West, 5.3% in the Midwest, and 5.7% in the South.

The housing market is a little like a pet rock. You keep starting at it, expecting it to start doing something ... anything! But month after month, it just sits there. In April, for instance, housing starts once again slumped into the low-500,000 annualized range while permitting activity faded 4%. That leaves home construction in the same depressed range it has been mired in for two and a half years.

The simple reality is that we had a once-in-a-lifetime bubble thanks to easy credit, nonexistent regulation, rampant speculation, and more. The government has responded by throwing hundreds of billions of dollars at the problem, while the Fed has been printing money like mad. Yet it has all accomplished very little. That just underscores the point I've made for a very long time -- the only "cure" for the housing bust is the passage of time and lower home prices.