RealEstateEconomyWatch.com

New Home Sales

(12-23-10 Release Date)

 Nov    Oct    Sep    Aug    Jul      Jun     May    Apr

Total NHS              0.29  0.28    0.31  0.27   0.28   0.31    0.28    0.41

Months’ Supply      8.2      8.8      7.9    9.1    8.9     8.2      9.2      6.3

Source: Census Bureau; 2010, annualized, seasonally adjusted.

Highlights

• New home sales rose 5.5 percent to 290,000 annualized units in November from a month earlier.
• November’s new home sales pace is 21 percent below the pace set a year ago.
• The months’ supply of new homes fell slightly to 8.2, reflecting a rise in November’s sales pace but there was also a slight drop in the number of units available for sale during the month.
• The median new home price dropped 2.8 percent in November from a year ago.

Analysis

The new home sales numbers were a bit of a disappointment; the monthly increase was less than expected.  The pace of new home sales remains historically low, reflecting weak and tenuous housing demand. Weak demand for new homes has kept homebuilder confidence levels low. On a positive note, the inventory of new homes available for sale remains lean; homebuilders’ inventory is close to a 40-year low.

Looking ahead, home sales-new and existing-are expected to post modest gains throughout the year. The key drivers of housing demand: jobs, income and confidence, are not expected to break out of last year’s funk anytime soon. And a homebuyer tax credit is not in the offing this year to provide a temporary boost in housing demand like it did in the first half of 2010.

2011 will likely be an improvement over last year, but a full recovery in housing is not in the cards. A less than stellar economy combined with an excessive amount of distressed sales and depressed home values will keep a full fledged recovery at bay.