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 11/26/08 For Oct 2008 | ||||||||||||
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Highlights
New home sales are breaking down further, bringing in line the whole host of housing indicators to indicate deepening contraction in demand and deep contraction in prices. New home sales dropped to an annual rate of 433,000 in October, down a very steep 5.3 percent on the month and down 40.1 percent from a year ago. A level comparable to 433,000 was last seen in the 1991 recession, more than 17 years ago. The 40 percent year-on-year drop isn't a record but it's very near a record in more than 40 years of available data.
The median price for a new home fell 1.7 percent in the month to $218,000, a level 7.0 percent lower than a year ago. The year-on-year decline is actually an improvement from the prior month but future improvement, given the decline in sales and a swelling in supply, is unlikely. There were 381,000 new homes on the market in October, down a record 8.0 percent from the prior month but, when compared against the sales rate, actually shows deterioration, at 11.1 months of supply vs. 10.9 months in September. Stocks fell in immediate reaction to the report, a report that tops off a morning of deeply troubling data.
New home sales rose 2.7 percent in September to an annual rate of 464,000. The 464,000 rate, nevertheless, marked the first back-to-back sub-500 rates since the 1991 recession. The lower level of housing starts, however, has finally started to impact supply somewhat. Supply slipped to 10.4 months from 11.4 months in August. Builders are definitely cutting back as the number of new homes for sale, at 394,000, was the lowest in four years. But the bump up in sales clearly has come from required heavy discounting. The median price declined 0.9 percent in September month to $218,400 and was also the lowest in four years. The year-ago decline stood at 9.1 percent.
New home sales Consensus Forecast for October 08: 450 thousand-unit annual rate
Range: 380 thousand to 500 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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