New Home Sales Increase 23 percent to Second-Worst Rate on Record

Dennis Norman

Yes, the headline is correct….New home sales in June were up 23 percent from May, but unfortunately the revised May annual new home sales rate of 267,000 was the lowest rate of sale on record therefore even after a 23.6 percent increase it only brought June up to 330,000 new homes, a rate that is now the second lowest new home sales rate on record. June’s new home sales rate is 16.7 percent below a year ago.

There is some good news in the report; the inventory of new homes (seasonally adjusted) at the end of June is 7.6 months, a 20.8 percent decrease from May’s revised inventory of 9.5 months and is a 10.6 percent decrease from June 2009 when the inventory was 8.5 months.

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 New Home Sales September 2009the “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 as we have seen what an artificial “bubble” in the market this can cause.

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

  • 30,000 new homes sold in June, an increase of 15.4 percent from May’s 26,000 new homes sold (revised) but is an 18.9 percent decrease from June 2009 when there were 37,000 new homes sold.
    • 53.3 percent (16,000) of the new homes sold were in the South region- an increase of 23.0 percent from May.
    • the west region had 5,000 new homes sold, a decrease of 16.7 percent from May’s revised sales.
    • the Midwest had 5,000 new homes sold, an increase of 25.0 percent from May.
    • The Northeast had 4,000 new homes sold, an increase of 33.3 percent from May.
  • YTD – In the first six months of 2010 there have been 183,000 new homes sold, a decrease of 2.7 percent from the same time last year.
  • Median sale price of new homes in the US in June was $213,400, a 1.4 percent decrease from May’s median new home price of $216,400 and 0.6 percent decrease from a year ago when the median new home price was $214,700.
  • New Homes in the US in May have been for sale for a median time of 12.4 months since the homes were completed, a 12 percent decrease from May’s revised figure of 14.1 months.

My prediction for 2010

I’m encouraged by indications of some price stability we are seeing as well as decreasing inventory of new homes. I’m concerned about the new home permits and starts as they appear to be greatly outpacing sales and could lead to increased inventories and I’m also concerned about the underlying economy and general anemic behavior of the real estate market. Clearly this market is not going to fix itself overnight, nor this year even. However, having said that, I’m going to stick with, what I think is perhaps somewhat optimistic, prediction of 336,600 – 355,000 new home sales in 2010.

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