New home sales fall in January…down over 18 percent from a year ago

Today, the U.S. Department of Housing and Urban Development and U.S. Census Bureau released new home sales data for January 2011 showing a decrease of 12.6 percent from the month before, and a decrease of 18.6 percent from a year ago.

The seasonally-adjusted new home sales rate for January was 284,000 homes. The supply of new homes on the market increased from an adjusted 7.0 month supply in December to a 7.9 month supply in January. The median new home price decreased for the month to $230,600 a 1.8 percent decrease from a revised median price of $235,000 the month before and an increase of 5.7 percent from a year ago.

My Mantra

As has been my long-running mantra, I don’t like “seasonally adjusted” numbers and “rate” of sales. Why, for one I can’t figure out how in the world they compute the numbers. Second, I just don’t think discussing the “rate” of new home sales paints a realistic picture of the market.

Here is the raw data, the ACTUAL new homes sold- no fluff, no “adjusting” For January, 2011:

  • 19,000 new homes sold, a decrease of 13.6 percent from 22,000 new homes sold in the previous month, and a 20.8 percent decrease from a year ago when there were 24,000 new homes sold.
    • As usual, the South had the majority of the new home sales with 9,000 this month (47.3 percent of the total in US)
    • the west region had 5,000 new homes sold.
    • the Midwest had 3,000 new homes sold.
    • The Northeast had 2,000 new homes sold.
  • New Homes in the US in sold during January been for sale for a median time of 7.8 months since the homes were completed down from 7.9 months the month before.

Poor new home sales numbers show “bargains” are driving the market..

We have seen an improvement recently in reports on existing home sales but new home sales are not following suit. Why? My thoughts are that this proves that the only thing that is propping up the existing home sale market at this point are the distressed sales which make up over a third of the sales, and are being sold at dramatically discounted prices. While there are some “distressed sales” of new homes I don’t think they are plentiful and therefore the new home sales activity is a better barometer of what the housing market is really like at this point.

My prediction for 2011…

I think the real estate market still has plenty of hurdles to clear, namely mortgage delinquencies, foreclosures and underwater borrowers, however I do feel the market is at, or near, the bottom (a rocky bottom at that) and in many markets is starting to trend slightly upward. Therefore I’m looking toward 2011 with just a little bit of optimism, particularly with new home sales. Much of the “troubled” new home inventory has been sold off so going forward builders will have to compete with those “below cost” sale prices less and less. This, in addition to the fact that I think there is a certain amount of “pent-up” demand for new homes, makes me think 2011 will be better than 2010 in terms of new home sales. Will 2011 be able to climb back up to the 2009 level of 375,000 new homes? No, I don’t think so, but I do think it will be better than the 321,000 homes 2010 ended with. Therefore, I’m going to go into 2011 predicting 331,000 – 361,000 new homes will be sold in 2011.

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1 comment to New home sales fall in January…down over 18 percent from a year ago

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