New Home Sales: Some Perspective

New home sales surpassed estimates: 384,000 vs. 352,000

However, please take note:

- This represents a 21.3% fall from June, 2008

- The median price has fallen 12% from June, 2008 and 5.8% from May, 2009

- Inventory stands at 8.8 months. This is a marked improvement from the last few months, but still exceeds the 20 year average of 5.8 months

Existing Home Sales

June existing home sales slightly bested expectations. The above graph tracks the median sales price versus the amount of existing home inventory since January, 2008. I am less impressed by the month over month improvement than I am by the year over year performance. June's combination of seasonal factors, pricing and mortgage rates was enough to lure the most buyers into the market in over 12 months (and mortgage rates hit their highs in June)*.

*based on actual number of sales recorded for that month (not annualized)

Durable Goods and Today's Action

New orders for durable goods exceeding economists' estimates, climbing to $163.9 billion for the month of May (March & April numbers were revised a bit lower). Once again, could this signal a bottom? Sure, why not? However, this number is still running 25% lower than it was during 2008. This is certainly a casualty of the housing collapse. Not only are the builders and construction workers directly effected, but appliance factory workers, shippers, etc. are impacted as well.



Yesterday's data included existing home sales. The number came in a bit lower than the consensus estimate. Inventory moved a bit lower, but prices are still well below the trend line. Until housing stabilizes, neither the manufacturing or financial sector will recover.

On a related note, S&P downgraded several securities backed by jumbo prime mortgages. The surprising part of it: paper issued as early as 1998 was impacted. Since mortgages written that far back are not generally characterised by terrible underwriting standards (like 2005 - 2007, especially 2007), one could imply that job losses to stable bill payers are taking their toll on the housing market.

Equity futures are moving higher, Treasuries are moving lower and the dollar can't find a buyer. I can't imagine that much will happen before the Fed announcement this afternoon.

New Home Sales

New home sales budged a bit higher to an annualized level of 352,000. The March figure was revised lower from 356,000 to 351,000 (yep, more revision funny business).

The last time averaged this many new home sales was 1982. The time before that was in 1966. Granted, data only goes back to 1963. However, this is a major adjustment to our economy.

Existing Home Sales

Headline number came in a hair above consensus: 4.68 million annual rate vs. expectations of 4.66 million.

Digging a little deeper:

- Inventory pushing higher, 10.2 months worth of supply. The March print was 9.6 months.

- Considerable revisions to mean sales prices: that February print of 235k was revised to 210k, other less dramatic downward revisions as well.