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| New Home Sales Are Not Getting Worse |
| Written by Jonathan Smoke | |
| 08.27.2008 | |
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Discuss this article on the forums. (0 posts) Preliminary data on July new home sales were released by the Commerce Department yesterday. The stats were a bit more positive than last month, but looking at the statistical significance of these survey based metrics, it’s essentially the same story—new home sales are treading water. In July, sales of new single family homes were at a seasonally adjusted annual rate of 515,000, which is 2.4% above the revised June rate of 503,000 but 35.3% below the July 2007 rate of 796,000. The 2.4% increase is not statistically significant. That means sales could have been up or down—it’s too close to call. The seasonally adjusted estimate of new homes finished and unsold (inventory) at the end of July was 416,000, which is 10.1 months’ supply at the current paltry sales rate. As you can see from the chart below that shows the monthly pace of new home sales against the months’ supply of new homes, the trend is generally in the right direction, but we need these two metrics to converge to get out of this downturn. Like the mid-1990’s, it would be much better for the months’ supply to be closer to 6, which will require a pace of approximately 60,000 new homes sold per month or an annual rate of 720,000. While we aren’t back to normal conditions yet, we can at least be pleased that we recorded another month where the situation did not get worse and actual inventory levels are slowly declining. 
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