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Friday, August 24, 2007

More on July New Home Sales

by Calculated Risk on 8/24/2007 10:32:00 AM

For more graphs, please see my earlier post: July New Home Sales

New Home Sales and RecessionsClick on graph for larger image.

The first graph shows New Home Sales vs. Recession for the last 35 years. New Home sales were falling prior to every recession, with the exception of the business investment led recession of 2001. This should raise concerns about a possible consumer led recession in the months ahead.

New Home Sales
The second graph compares annual New Home Sales vs. Not Seasonally Adjusted (NSA) New Home Sales through July.

Typically, for an average year, about 61% of all new home sales happen before the end of July. Therefore the scale on the right is set to 61% of the left scale.

At the current pace, new home sales for 2007 will probably be in the mid 800 thousands - about the same level as in 1998 through 2000. This is significantly below the forecasts of even many bearish forecasters.

If sales slow in the coming months - as I expect - New Home sales might be in the low 800s - the lowest level since 1997. My forecast is for 830 to 850 thousand units in 2007.