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| New Home Sales Supply Is Slowly Shrinking |
| Written by Jonathan Smoke | |
| 07.25.2008 | |
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Discuss this article on the forums. (0 posts) Say that alliteration three times quickly, “New Homes Sales Supply Is Slowly Shrinking.” It’s good for enunciation, and it’s good to convince yourself that things aren’t getting worse. The Commerce Department reported June new home sales data today. The news was not negative! The report said that sales of new homes in June 2008 were at a seasonally adjusted annual rate of 530,000, which was 0.6% below the revised May rate of 533,000. The tiny decline isn’t statistically significant—just like last month’s report, we know we are not getting better or worse—just sideways for now. I found two additional sources of comfort in the data beyond the fact that conditions are not getting worse. First, the supply of new homes was down to 10.0 months from May’s 10.4 months. Again, not statistically significant, but again, not getting worse! And, April and May’s reported sales were both revised upward by 3-4%. Continuing my theme of looking at non-seasonally adjusted numbers from yesterday, the unadjusted new home sales were down from May but at the same level as April. I have a feeling when July’s report comes out the June total of 49,000 will be revised up to at least May’s revised level of 51,000. More encouraging was that the non-seasonally adjusted supply of new homes fell for the sixth straight month to June’s preliminary number of 8.7 months based on an estimated total inventory of 425,000 homes. Let me frame a further positive view for you. The figure of 8.7 months is based on the current very depressed rate of new home sales. Instead of using that pace, let’s use the average of the total new homes sold between 1993 and 2001 (after the last major recession and downturn but before the boom started in 2002). Then the total current inventory of 425,000 homes is 54% of the average “normal” pace of annual new home sales (791). That means builders have slowly worked down inventories to 6.5 months of normal home sales. Repeat after me, “New Homes Sales Supply Is Slowly Shrinking.” 
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