Monday, October 27, 2008

Census Bureau Reports New Home Sales Figures

Click HERE for the complete report.

Headlines this morning read that there was a surprising increase in new home sales.

Bloomberg reports U.S. Economy: New-Home Sales Rose in September From 17-Year Low

Oct. 27 (Bloomberg) -- Sales of new houses in the U.S. were unexpectedly rising before credit markets froze this month, having rebounded from a 17-year low thanks to a drop in prices.

Purchases increased 2.7 percent in September to an annual rate of 464,000 from 452,000 the prior month that was less than previously estimated, the Commerce Department said today in Washington. The median sales price decreased to a four-year low.

Floyd Norris explains, New-Home Sales Up? No.

The new-home sales figures out today are being heralded as a gain, showing that builders are finally cutting prices enough to move the inventory.

I wish it was true. But the evidence to support that is tenuous, at best. The reality is that new-home sales in September were the lowest for any month since December 1991.

The seasonally adjusted annual rate of new-home sales did rise, from 452,000 to 464,000. But that is just because the seasonal adjustment factor kicked in. Actual sales in September were estimated at 36,000, down from 38,000 in August.

The median age of completed but unsold new homes hit a record 9.1 months in September, up from the record 8.9 months a week earlier. The inventory of completed but unsold homes is only down to 170,000 from a peak of 199,000 in January. It will take a long time to work off that surplus unless sales pick up.

Here is the chart from the Census Bureau. I’ve highlighted the most important numbers. In the West, there was an increase in activity, even in the non-seasonally-adjusted figures, from a 7 to an 8. Seasonally-adjusted, the sales figures jump from an 88 in August to 108 in September (which is still really bad). Still, this does illustrate that there are buyers out there if the price is right. Remember, price follows volume…so any increases in sales volume represent progress towards finding the eventual bottom.

New Houses Sold and For Sale Oct Report