Interest Rate Roundup

Tuesday, May 24, 2011

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.


  • The used home inventory will decline just about the time interest rates rise and we enter the "Age of Austerity". This will be the final nail in the coffin for many builders.

    By Anonymous Anonymous, at May 25, 2011 at 12:26 AM  

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