New homes were started in November at an annual rate of 482,000 homes and I asked why in my post last week since new home construction was already outpacing sales….well, today the gap got worse..

This morning the U.S. Department of Commerce released a report showing the sale of New Homes in November were at a seasonally adjusted annual rate of 355,000, an 11.3 percent decrease from the revised October rate of 400,000 and is 9.0 percent below 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. I think this holds especially true when we have artificial forces affecting the housing market such as tax credits and other incentives. This can create unseasonal bursts or declines in sales that don’t really have anything to do with the underlying fundamentals of the housing market.

Effect of tax credits on homebuyers like kid’s “sugar-rush”?

Last month I described the effect of the homebuyer tax credits on the market like a kid’s sugar rush and said “come December we may very well see new home sales slow significantly and lose the momentum that was a result of the “sugar rush affect” on homebuyers of the tax credits that gave them that quick surge of energy and motivation to buy, but then quickly wore off as the urgency subsided with the extension of the credits.” Well, December is here and look what happened to new home sales. Kind of makes it appear I’m “in the know”, huh? Nah, just lucky and also predicting something that appeared to be obvious.

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

• 25,000 new homes sold in November, a 24.2 percent decrease from October’s 33,000 new homes sold and a 7.4 percent decrease from November 2008 when there were 27,000 new homes sold
  • 48 percent (15,000) of the new homes sold were in the South region- an decrease of 25.0 percent from October’s 20,000 new homes sold
  • the west region had 5,000 new homes sold, a decrease of 28.5 percent from October’s 7,000 homes sold
  • the Midwest held steady with 5,000 new homes sold, the same as October.
  • The Northeast had 2,000 new homes sold, a decrease of 33.3 percent from October’s 3,000 new homes sold.
• 349,000 new homes sold this year through the end of November which is a 23.9 percent decrease from this time last year when there were 459,000 new homes sold.
  • on YTD new home sales all four regions of the US have seen a decrease from the year before
    • Midwest decrease of 23.2 percent
    • South decrease of 25.0 percent
    • West decrease of 24.5 percent
    • Northeast decrease of 15.2 percent
• Median sale price of new homes in the US in November was $217,400, an increase of 2.4 percent from October’s median price of $212,200.
• For the new homes sold in the US in October the median time they have been on the market for sale is 13.6 months.
• Inventory of new home in US at end of October is 234,000 a 2.0 percent decrease from October’s inventory of 239,000 – this is very good news…

My prediction

For some time I have been predicting new home sales for 2009 would end up around 385,000 – 395,000…last month I pinned the number down at 390,000…I was feeling somewhat optimistic because of the tax credits but now I can see the numbers are probably going to fall short of my prediction. If you have been reading any of my posts for a while it’s kind of hard to believe I was overly optimistic, isn’t it?

Merry Christmas

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