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| Higher New Home Sales Reported |
| Written by Jonathan Smoke | |
| 08.24.2007 | |
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Discuss this article on the forums. (0 posts) The Commerce Department reported this morning that sales of new single-family homes increased by 2.8% in July to a seasonally adjusted annual rate of 870,000. They also revised the previously reported June figure from 834,000 to 846,000. So according to these government national statistics, both June and July looked better than anticipated and were higher than what most economists were expecting. Additionally, new home sales are showing a stubbornness not to fall beneath a seasonally adjusted annual rate of 800,000. Is this cause for celebration? It is encouraging that the national sales numbers are staying above 800,000, and if we see another month of positive movement, the 12-month moving average will begin to turn. As you can see from the chart of new home sales since 1983, 800,000 is a relatively good level. Just forget about the last 5 years. But, I have my doubts about the relevance of these numbers given the current significance of credit tightening impacting new home sales. There have been numerous reports and rumors of cancellations increasing recently and cancellations are not reflected in these gross new order based numbers. It is likely that many new orders will not end up closing in 2007 because of the inability of the buyer to get a mortgage. Additionally, many buyer sales are contingent on selling an existing home, which may also be impacted significantly by the credit crisis. So, there’s reason for hope, but we really need to see new home closing numbers or at least little evidence of cancellation rates increasing before we can feel confident that sales are stabilizing and not getting worse. 
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