RealEstateEconomyWatch.com Insight and Intelligence on Residential Real Estate
(August 26, 2009 Release)
Highlights
• New home sales rose 9.6 percent in July to an annualized 433,000 units compared to 395,000 annualized units posted in June.
• The healthy increase in sales was welcome news. New home sales were mixed by region. The sales in the Northeast, South increased a healthy 32.4 percent and 16.2 percent, respectively, while sales in West rose by only 1 percent and sales in the Midwest fell 7.6 percent from a month earlier.
• The months supply fell to 7.5 in July from 8.5 in Juney.
• The median new home sales price was down 11.5 percent compared to a year ago.
| New Home Sales, Mil., SAAR | ||||
| July 09 | June 09 | 3 mo Avg. | 1 yr ago | |
| United States | 0.433 | 0.395 | 0.397 | 0.500 |
| % change | 9.6 | 9.1 | -13.4 | |
| Northeast | 0.045 | 0.034 | 0.035 | 0.041 |
| % change | 32.4 | 36.0 | 9.8 | |
| Midwest | 0.061 | 0.066 | 0.058 | 0.064 |
| % change | -7.6 | 37.5 | -4.7 | |
| South | 0.222 | 0.191 | 0.205 | 0.272 |
| % change | 16.2 | -5.4 | -18.4 | |
| West | 0.105 | 0.104 | 0.099 | 0.123 |
| % change | 1.0 | 19.5 | -14.6 | |
| Months’ Supply | 7.5 | 8.5 | 8.6 | 10.1 |
| New Median Home Price, $ | 210,100 | 210,400 | 213,966 | 237,300 |
| % change | -0.1 | -5.0 | -11.5 | |
Source: Census Bureau; median home price not seasonally adjusted
Analysis
The increase in new home sales in July was surprisingly strong. The 433,000 unit annualized pace set in July was the strongest pace this year and new home sales has now rose for four consecutive months. True, the current annualized pace of 433,000 continues to reflect a very weak new home sales marketplace, but it is now significantly above the 329,000 annualized pace set in January of this year. Clearly, the January number was the bottom for new home sales which is showing strong signs of stabilizing.
The inventory of new homes has made significant progress over the past year. A healthy drop in new homes available for sale has brought the months’ supply down to 7.5 in July from a high of 12.4 in January of this year. It appears that the year long weak new construction activity has had a positive impact on new home inventories. It also appears that price depreciation has helped support new home sales. The median new home sales price fell 11.5 percent from a year ago. Homebuilders continue to drop prices in an effort to compete against foreclosure sales.
Most economic and housing indicators point towards more stabilization in the new home marketplace. Monthly job losses are slowing, the Obama administration’s foreclosure mitigation programs are beginning to slow foreclosure filings, home affordability measures remain at high levels, and mortgage rates are hovering near historic lows. However, the economic recesssion and falling home prices continue to pose serious risks to the nation’s housing sector. And we are particularly worried about the apparant building pipeline of foreclosures which could inhibit future new home sales, and exert downward pressure on new home prices. The Mortgage Bankers Asssociation’s mortgage delinquency survey (third quarter) reported that the 90 days or more delinquent category rose to another record level, which suggests a rise in future foreclosure filings. On balance, we continue to believe that the housing sector bottomed out earlier this year, and is poised to experience a very modest recovery at best by the end of this year with the exception of home values which may continue to fall well into 2010.
