Wikinvest Wire

That clunking sound you hear

Friday, July 25, 2008

The Commerce Department filed their monthly report(.pdf) on new home sales a short time ago and, like existing home sales, that clunking sound you hear just might be a bottom now forming in home sales (not to be confused with home prices).That makes four months now of about flat new home sales and, like the ten month stretch of relatively flat existing home sales, it's possible that sales volume has gone about as low as it's going to go.

Of course, that doesn't mean sales are likely to go any higher anytime soon and, with foreclosures setting new records every month, home prices are sure to go lower, perhaps much lower.

The sale of new homes fell less than expected last month, from an upwardly revised 533,000 in May to 530,000 in June, and inventory dropped from 10.4 months of supply to 10.0 months. While this level of inventory remains historically high - more than double the long-term average - it is an improvement over recent months.

The median sales price fell to $230,900, down 2.0 percent from the June 2007 level, however, builders continue to offer many incentives and other give-aways that make the reported changes to new home prices almost meaningless.

The leveling off of home sales, if it continues, will surely provide some welcome relief for both home builders and real estate professionals.

If, on the other hand, you are a home seller, relief may take some time.

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Anonymous said...

You need to consider that cancellation rates are running anywhere from 20-40% and new sales are recorded at the time the contract is signed. Therefore if the "buyer" can't qualify for the loan your sale falls through but remains recorded as a sale. Additionally the months you're looking at are the peak sales months. Let's see what happens when the leaves start dropping - bet the sales renew their plunge.

Anonymous said...

Cancellations have been steady for about the last year and the data in the chart is seasonally adjusted (says so right below the title).

Anonymous said...

Why couldn't this spike be the same spike seen in mid 2006, or slightly later than mid 2007?

A.K.A. the summer selling season, when inventory appears to peak.

Realtors are telling people not forced to sell not to even bother listing, and anyone listing foreclosures is likely so backed up they're not even putting them all on the market. Let's see how the slow season goes before calling a mid-summer spike the turn around for inventory.

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