Wednesday, January 27, 2010

New Home Sales Decline Sharply in December

by Bill McBride on 1/27/2010 10:00:00 AM

The Census Bureau reports New Home Sales in December were at a seasonally adjusted annual rate (SAAR) of 342 thousand. This is a sharp decrease from the revised rate of 370 thousand in November (revised from 355 thousand).

New Home Sales Monthly Not Seasonally Adjusted Click on graph for larger image in new window.

The first graph shows monthly new home sales (NSA - Not Seasonally Adjusted).

Note the Red columns for 2009. In December 2009, a record low 23 thousand new homes were sold (NSA); this ties the previous record low set in December 1966.

Sales in December 2008 were at 26 thousand.

New Home Sales and Recessions The second graph shows New Home Sales vs. recessions for the last 45 years. New Home sales fell off a cliff, but after increasing slightly, are now only 4% above the low in January.

Sales of new one-family houses in December 2009 were at a seasonally adjusted annual rate of 342,000 ... This is 7.6 percent (±14.6%)* below the revised November rate of 370,000 and is 8.6 percent (±15.2%)* below the December 2008 estimate of 374,000.
And another long term graph - this one for New Home Months of Supply.

New Home Months of Supply and RecessionsThere were 8.1 months of supply in December. Rising, but still significantly below the all time record of 12.4 months of supply set in January.
The seasonally adjusted estimate of new houses for sale at the end of December was 231,000. This represents a supply of 8.1 months at the current sales rate.
New Home Sales Inventory The final graph shows new home inventory.

Note that new home inventory does not include many condos (especially high rise condos), and areas with significant condo construction will have much higher inventory levels.

Months-of-supply and inventory have both peaked for this cycle, and sales might have bottomed too. New home sales are far more important for the economy than existing home sales, and new home sales will remain under pressure until the overhang of excess housing inventory declines much further.

Obviously this is another very weak report. I expect the Fed will change their statement on housing today. I'll have more later ...

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