June new home sales fail inspection

[pscot]

http://theautomaticearth.blogspot.com/

US Home Sales Numbers Fail Inspection

Many investors celebrated Monday after June's "surge" in U.S. new-home sales. Alas, it was largely wishful thinking. True, the Census Bureau reported sales up 11% from May. That's a big number, at first glance justifying Monday's 4.5% leap in the Dow Jones U.S. Home Construction Index. But it fails a close inspection.

First, home sales quite often jump in June, the height of the spring selling season. When trying to gauge the strength of home sales, then, it makes more sense to compare them to the same month a year ago. That comparison is less kind -- sales were down 21.3% from June of 2008. Seasonally unadjusted data show a total of 36,000 new homes were sold last month, the lowest June total since 1982, notes Richard Moody, chief economist at Forward Capital.

And the Census Bureau warns against assuming too much precision in these numbers, which are based on a sample survey. Accounting for a 13.2% margin of error -- at a 90% confidence level, suggesting the actual error could be higher -- new-home sales enjoyed somewhere between a 24.2% gain or a 2.2% decline from May. New-home inventories are falling, an encouraging development. But inventories are still higher than their historical norm, and there remains an avalanche of distressed sales.

Little wonder, then, that June's "surging" sales were driven by heavy discounting. The median new-home price -- not seasonally adjusted -- fell 12% in June from a year ago to $206,200, the lowest June sales price since 2003. And it was down 5.8% month on month. To paraphrase Pyrrhus, if sales keep soaring like this, then homebuilders will be utterly undone.

[hobbit709]

1. There's lies, damned lies, and statistics

[EC]

2. At least homes are being sold... n/t

[pscot]

3. Then here's this

http://www.ritholtz.com/blog/2009/07/real-estate-quote-of-the-day/

"National New Home Sales, on a monthly basis, don’t even add up to half of the total foreclosure activity in California alone in a single month.”

Mark M. Hanson

Reread the last paragraph of the OP. It suggests builders are marking down inventory to unsustainable levels in order to clear it.

[CoffeeCat]

4. Is it cheaper to buy new now?

I am wondering if it's cheaper to buy a new home now, as opposed to buying an existing homes--so many
people are opting to buy new. Is that possible?

With housing values way down--that makes it tricky with existing homes--because you have sellers who have
lost a ton of money. They might be pricing a new home too high--in order to avoid losses.

So, if I'm looking for a house--it's possible that with home values down--you could get more bang for your
buck with a new home--with no owner basing his price on what he paid for the house during the housing boom.

We paid $215k for our house. I doubt we could get that out of it. We might break even. However, someone
wanting to build new could get a brand new, comparable home in the $220k-$230k range--and in many cases, they'd
be getting some upgrades that our home doesn't have.

Just a thought...