(July 27, 2009 Release)
Highlights
• New home sales rose 11.0 percent in June to an annualized 384,000 units compared to 346,000 annualized units posted in May.
• The healthy increase in sales was welcome news. New home sales were mixed by region. The sales in the South fell by 5.3 percent, while sales in the Midwest, Northeast and West rose by 43.1 percent, 29.2 percent and 22.6 percent, respectively from a month earlier.
• The months supply fell to 8.8 in June from 10.2 in May.
• The median new home sales price was down 11.9 percent compared to a year ago.
| New Home Sales, Mil., SAAR | ||||
| June 09 | May 09 | 3 mo Avg. | 1 yr ago | |
| United States | 0.384 | 0.346 | 0.356 | 0.488 |
| % change | 11.0 | 2.4 | -21.3 | |
| Northeast | 0.031 | 0.024 | 0.026 | 0.035 |
| % change | 29.2 | 9.1 | -11.4 | |
| Midwest | 0.073 | 0.051 | 0.055 | 0.069 |
| % change | 43.1 | 24.4 | 5.8 | |
| South | 0.177 | 0.187 | 0.187 | 0.270 |
| % change | -5.3 | -5.6 | -34.4 | |
| West | 0.103 | 0.084 | 0.088 | 0.114 |
| % change | 22.6 | 9.1 | -9.6 | |
| Months’ Supply | 8.8 | 10.2 | 9.9 | 10.7 |
| New Median Home Price, $ | 206,200 | 219,000 | 214,000 | 234,000 |
| % change | -5.8 | 0.9 | -11.9 | |
Source: Census Bureau; median home price not seasonally adjusted
Analysis
The increase in new home sales in June was surprisingly strong. The 384,000 unit annualized pace set in June was the strongest pace since the 390,000 annualized unit pace in November 2008. True, the current annualized pace of 384,000 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.
However, it is important to point out that the South region, which is by far the largest region for new home sales in the nation, has contracted for two consecutive months. Furthermore, the West region’s robust gains are probably due to California households who were enticed by the state’s tax credit for purchases of new homes. Unfortunately, the California tax credit is out of funds and it is unlikely, given the state’s financial difficulties, that additional funds will be raised to keep the credit going. On a more positive note, the months’ supply is now below 9 (8.8), reflecting a healthly reduction in new home inventories. This is primarily due to the weak pace of new home construction during the past year. The level of inventory is now at 281,000 which is close to a reasonable level of new homes available for sale under normal housing conditions.
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. 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.
Leave a Reply