New home sales measure the number of newly constructed homes with a committed sale during the month. The level of new home sales indicates housing market trends and, in turn, economic momentum and consumer purchases of furniture and appliances. Why Investors Care
| Released on 6/25/08 For May 2008 | ||||||||||||
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Highlights
Spring came and went and did nothing to lift the housing market. The latest bad news comes from the new homes sales report which shows a 2.5 percent month-on-month decline in May to an annual adjusted unit sales rate of only 512,000. Sales levels were this low back in the early 90s and during the recessions of the 80s and 70s (note that the latest comparison is against smaller populations). The year-on-year decline remains in the 40 percent column at 40.3 percent. There was special trouble in the West where the month-on-month decline was 11.6 percent for a year-on-year decline of 43.0 percent. The 114,000 unit sales in the West are the lowest adjusted monthly total in the region in nearly 26 years.
New home prices, which have held in better than prices for existing homes, are finally beginning to give in, down 5.1 percent in the month to a median $231,000 that's down 5.7 percent year-on-year. The number of new homes available for sale is coming down, at 453,000 for the lowest level in more than two years. But the decline is slow relative to sales which are declining even faster. The months' supply on the market rose to 10.9 months from 10.7 months.
There was no significant reaction to the results which are no surprise and in any case come ahead of the FOMC statement at mid-afternoon. The housing market along with the financial sector remain the economy's central weaknesses -- with falling home prices a special concern for the consumer sector. Existing homes sales will be released tomorrow.
New home sales improved in April, rising 3.3 percent but against a downwardly revised March level. March's 509,000 annualized pace is the lowest since just after the end of the 1990-91 recession with April's 526,000 pace the second lowest. April's year-on-year percentage decline of 42.0 percent is the worst since the early 1980s. Prices steadied in the month, jumping 9.1 percent to a median $246,100 for an actual year-on-year increase of 1.5 percent and the best level since November. But the price increase is likely due to a shift in sales away from the low end due to tighter credit restrictions. Supply remains heavy at 10.6 months vs. 11.1 months in March.
New home sales Consensus Forecast for May 08: 515 thousand-unit annual rate
Range: 500 thousand to 570 thousand-unit annual rate
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There is no question that lower interest rates boost home sales. Other factors also impact housing decisisions, such as employment and income growth, and wealth stemming from stock market gains. |
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