Get Blog Updates on your iGoogle homepage:
| Parsing the Latest New Home Sales Data |
| Written by Jonathan Smoke | |
| 01.28.2008 | |
|
Discuss this article on the forums. (0 posts) Today the Commerce Department reported New Home Sales for December. Sales of new homes decreased by 4.7% last month to a seasonally adjusted annual rate of 604,000. The Commerce Department also downwardly revised the November sales to 634,000 from 647,000. According to the Wall Street Journal, economists were expecting a slight increase in December. I don’t know what those economists were smoking but they clearly weren’t paying attention to what was actually happening in new home sales offices around the country. From our vantage point, most builders gave up on 2007 by Thanksgiving. The monthly sales pattern reveals that the October uptick was an aberration on an otherwise negative trend. That blip was likely caused by strong incentives and sales programs that ended in October. Another factor worth considering is when the largest ten public builders have their fiscal year ends. Only Pulte, Standard Pacific and Ryland close their year-ends in December. D.R. Horton and Beazer closed '07 in September, while Hovnanian and Toll closed '07 in October. KB Home and Lennar closed '07 in November. Centex closes their books in March. And with the emphasis throughout the year on bringing down speculative inventory, there wasn’t much “bang for the buck” in selling homes in December — even for those with December year-ends. So in a very down year, in the worst quarter of that year, in the midst of a credit freeze, and in the seasonal time frame that few traditionally buy homes, many in the industry took a long holiday or started working on January sales. I guess that many economists expected the seasonal adjustment to help raise December, but this wasn’t a typical season. Is there anything positive in this? Sure. It could have been worse. According to the December data released last week by the National Association of Realtors, existing home sales declined less severely. Also, looking at the 30-year history of the monthly pace of home sales, new homes have been in lower territory—as recently as the early to mid-1990s. The pace of new home sales in November and December was beneath the 30-year average pace for new home sales, but sales of single-family existing homes remain above their 30-year average pace (NAR did not track total existing sales prior to 1999, so single-family sales are the best proxy that goes back to 1968). Are we near a bottom? The history of home sales clearly shows that the level of sales and pace of sales can go lower. But, December’s conditions for credit availability, interest rates, and consumer sentiment were clearly worse than the conditions will likely be over the next several months. If credit conditions improve with mortgage rates now lower, any uptick in traffic and sales will make a quick dent in existing inventories, and that might be the positive feedback signal that encourages buyers on the sidelines to get back into the market. 
We're always looking for feedback from our readers.
|
))
))
| < Prev | Next > |
|---|
