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Thursday, July 30, 2009

New Home Sales: June 2009

New home sales were reported earlier this week. Both of the following statements are true.

New home sales in June, 2009 were at their highest level since November 2008, but it was also the second lowest June since 1963, when record keeping began. Barry Riholtz notes that the worst June on record was 1982 and offers the following:
Then, 34,000 new homes were sold. There are twice as many households in America today as there were then, so relative to population this was the worst June ever, by far.
Point taken.

Digging further, new home sales for June, 2009 remain 21.3% less than June, 2008, 72% less than the peak in 2005. The reported rise over May, 2009 is actually within the margin of error.

This means any increase for June over May, might not have occurred at all. These are not items to get too excited about just yet from where we sit. Things are bunching up though. As futures traders would say, "The market is trying to form a bottom."

This article from Paper Economy focuses heavily on inventory of new homes and comparisons to previous market bottoms. Months of supply dropped to 8.8, however the number of homes for sale, and new homes completed remains elevated with respect to previous markets.

New home sales in the South were down 34.4% from one year ago.

New Homes vs Existing Homes
New home sales and the builders have taken a particular beating when compared to sales of existing homes, (EHS). EHS have benefitted from the large degree of distressed sales and lower prices in that mix. Foreclosures and short sales have been anywhere from 33% to 45% of total EHS for some time now.

This artificially raises the number of existing homes sold and hurts sales of new homes, to the point where long standing relationships between these two market segments have been fundamentally altered. Calculated Risk examines this graphically.

What that means for the future is a matter of theory. What it means for a recovery is that the number of distressed properties, delinquencies and foreclosures remains a problem.

Summary
It's getting interesting, we have touched most of the all time lows, and are kind of hovering there. Data over the next 3 or 4 months will give us clues for what to expect in the last quarter of 2009.

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2 Comments:

Blogger Roy said...

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Thanks,
Roy Peter - Real estate marketing

5:23 AM  
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