Interest Rate Roundup

Friday, September 24, 2010

New home sales flatline in August near record lows

The Census Bureau just released new home sales figures for last month. Here's a look at what they showed:

* New home sales flatlined at 288,000 units in August. That was slightly below forecasts for a sales rate of 295,000 according to Bloomberg, though it's worth noting the August sales rate was revised upward by 12,000 units. By region, sales declined 10.8% in the South and 26.1% in the Midwest. But they jumped 16.7% in the Northeast and 54.3% in the West.

* The raw number of homes for sale continues to sink. It fell to 206,000 in August from 209,000 in July. That's the lowest level going all the way back to August 1968 -- 42 years ago! On a months supply at current sales pace basis, inventory dipped ever so slightly to 8.6 from 8.7.

* What about pricing? Not much happening there. The median price of a new home dipped 0.6% to $204,700 from $205,900. That was the third month in a row of declines, and it leaves new home prices down 1.2% from a year ago. In fact, they're the lowest since December 2003.

New home sales remain depressed thanks to competition from the existing home market, lackluster consumer confidence, and labor market weakness. In fact, August's sales rate is only slightly above the nearly half-century low of 282,000 set in May. Or in plain English, we're not getting any significant bounce in the wake of the expiration of the home buyer tax credit. That's pretty incredible, frankly, when you consider home prices are at their lowest level in almost seven years and mortgage rates are the cheapest in the past century.

What's it going to take to heal the housing market? The passage of time. Lower prices. Less construction. And a broad economic recovery, one accompanied by much better job growth. So far, waiting for all that to come together is a bit like waiting for Godot. We'll have to see if that changes in 2011.


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