Today's housing news on new home sales in July sounds eerily similar to the post I wrote yesterday about July existing home sales. In both cases, we are given a quick headline that sounds like good news, but once you dig into the details a little deeper you realize that the news is just not as pretty as it first sounds.Let's first take a look at the positive headline: New home sales rise in July. Great, this is exactly the sort of news that the market needs to hear. After all, weakness in the housing market has been a major catalyst to the current economic slowdown, so any good news is like a breath of fresh air. During July the market saw a jump of 2.4%. Not too shabby.
But what does this really mean?
What the 2.4% jump relates to is a seasonally adjusted annual rate of 515,000 units. The positive side of this is that this is the highest level since April. Hey, in this environment I will celebrate any positive news coming out of the housing market, but as you know, there is a negative side to this story coming as well, and here it comes.
Going into today's report from the Commerce Department, Wall Street had been expecting to see a small drop in home sales down to 525,000. Does something sound strange to you? How did actual sales come in at 515,000 units, which was up 2.4%, when the market thought there would be a decline down to 525,000?
To answer that question we have to go back another month to look at June sales. Previously we were being told that there were 530,000 new homes sold in June, but that was well off the mark, and the new revised number shows that there were only 503,000 units sold. Therefor, June was the worst month for new homes sales since back in September of 1991.
More bad news: at 515,000, the numbers of new homes sold in July is a mind bending 35% lower than July of last year.
What all of this is leading to is lower home prices. We looked yesterday at prices for existing home sales. We noted that during July the average price of an existing home sale was down 7.1% year over year, so let's see how prices of new homes compares to that figure. In July new homes, on average, sold for 4.1% lower than last year. If you look at median home prices, the drop was more steep, with the median price for a new home in July being 6.3% lower than July of last year.
So what should we take from all of this? I wish I knew, but I don't. On one hand it looks like things could be starting to stabilize, and then on the other hand there are still many signs that things are going to worsen. If I were a betting man, I would bet on things getting worse through the remainder of this year, and stabilizing during the first half of 2009, but then again what do I know?
What are your predictions? When can we expect to see the housing market stabilize? This year, early 2009, the latter part of 2009, or even further down the road? Let us hear your thoughts on this troubling housing market.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
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Reader Comments (Page 1 of 1)
8-26-2008 @ 5:09PM
william lindblad said...
If anyone wants to know the first requirement will be to remove the nonsense and b.s. from reporting data.
When the N.A.of Realtors reports, they report sales as the initiating of a contract, not a closing. This type of reporting can (and has) been subject to manipulation.
As you pointed out with the government - they sort of pick a number and revise it later. They should report accurate figures only as the "guesstimates" are often way out of line and highly misleading.
To the market itself??
I invite you to go to HUD in search. Open the homes for sale and than open from Fannie Mae. Choose any place and you find that near every property has a "100% financing" guarantee attached. The 100% financing, no down, no income check, no nothing but sign on the line is what has caused this economic mess - including the major spike in fuel. Since they are holding the majority of the default notes and are now being backed by Paulson and OUR Treasury, the taxpayer is now in the mortgage business.
Since the Congressional finance committees, the Fed and the Treasury are all owned by Wall St. and the banks the crisis will only end with the destruction of the middle class.
8-26-2008 @ 5:57PM
toney said...
this is only the people with money cherry picking
homes in a down market, foreclosed prop. etc.
but the middle class can't afford these homes
which are still too high. why buy a house that
has a price that is too high. stick with the small
builders and get the same house 50% cheaper.
do some of the work your self. the same people
who builds for the big builders will mean money
in your pocket, plus plenty equity when you sale
after the market recovers.
8-26-2008 @ 11:45PM
madgamer01 said...
I agree that the housing market will stabilize in early 2009, as I don't think historically the fall has been good for new home sales.
8-27-2008 @ 6:17AM
al coholic said...
What makes these housing numbers even worse is that compared to 1991 US population has increased by nearly 50 million (Wikipedia).
Eventually though, housing will recover, even if for no other reason than increased population that has to live somewhere.
I do think that the trend for the last twenty years or so of huge increases in average square footage of houses may become a thing of the past. In addition the notion that no matter how much strain a huge mortgage puts on you it's justified by the appreciation of housing is also changing.