by Calculated Risk on 7/25/2012 02:23:00 PM

From economist Tom Lawler:

The US Census Bureau estimated that new SF home sales ran at a seasonally adjusted annual rate of 350,000 in June, down 8.4% from May’s upwardly-revised (to 382,000 from 350,000) pace. March and April sales were also revised upward. Current seasonally adjusted sales estimates are higher than the originally-reported estimates for each of the last eight months (October 2011 – May 2012). In the past, turning points in housing/home sales have often been accompanied by strings of either upward (when sales are rising) or downward (when sales are falling) revisions in Census’ new SF home sales estimates.

Long String of Upward Revisions in New SF Sales (SAAR, 000's)
	First Reported	Latest Estimate
Oct-11	307	314
Nov-11	315	327
Dec-11	307	339
Jan-12	311	339
Feb-12	313	366
Mar-12	328	352
Apr-12	343	358
May-12	369	382
Jun-12	350

According to today’s report, seasonally adjusted sales in the Northeast plunged by 60% in June, fell by 8.6% in the South, increased by 2.1% in the West, and jumped by 14.6% in the Midwest. Census does not report sales estimates for individual states, noting that its sample size is too small to produce reliable state estimates. Bad weather at the end of the month possibly impacted sales in the Northeast and mid-Atlantic part of the South.

Census also estimated that the number of new SF homes for sale at the end of June was 144,000 on a seasonally adjusted basis, up 0.7% from May’s downwardly-revised estimate but down 13.3% from a year ago.

Tomorrow three publicly-traded home builders -- Pulte Group (#2), Standard Pacific (#13), and M/I Homes report operating results for the quarter ending in June, while D.R. Horton (#1) reports on Friday.

Earlier:
• New Home Sales declined in June to 350,000 Annual Rate
• Some comments on New Home Sales and Distressing Gap
• New Home Sales graphs

by Calculated Risk on 7/25/2012 12:51:00 PM

Think about this ... if new home sales had been at expectations of 370,000 SAAR (seasonally adjusted annual rate), and there had been no revisions to the previous months sales, sales would have averaged 356,000 SAAR for the first six months of the year.

Instead sales came in below expectations for June, but all the revisions to previous months were up, and sales averaged 358,000 SAAR in the first half of 2012.

Of course the reporting focused on the most recent month, but that is misleading. With the upward revisions, sales are a little higher than expected over the first half of 2012. And it is important to note that sales are being revised up every month, and based on the recent trend, June will probably be revised up too. The report this morning was below expectations, it was still fairly solid.

Note: Long term readers will remember that every revision was down in 2006, and each "upside surprise" in the new home sales report was revised away. Now the opposite is happening.

Another thought: In 2011, there were 306,000 new home sales. At the first half 2012 sales rate of 358,000, sales will be up 17% in 2012. A recovery is NOT the level of sales, but the change from the previous period. Clearly new home sales have bottomed and are starting to recover.

Here is a very unfortunate headline from CNBC: Home Sales Disappoint Twice

Sales of newly built homes fell hard in June, despite newfound optimism in the housing recovery, especially among the home builders themselves.
...
This is the second miss for housing in the same month. Sales of existing homes fell as well, despite expectations for a gain.

Actually both reports were fairly solid.

As I've pointed out before, the key number in the existing home sales report is not sales, but inventory. It is visible inventory that impacts prices (although the "shadow" inventory will keep prices from rising). Since existing home inventory was down again in June, this was a positive report (the number of existing home sales is related to commissions, but otherwise existing home sales barely impact GDP).

For the new home sales report, the key number is sales. As I noted earlier, sales for June were below expectations, but sales for the first six months were slightly above expectations. So I wasn't disappointed in other report - and I think the CNBC headline was wrong - twice!

Here is an update to the distressing gap graph.

Click on graph for larger image in graph gallery.

This "distressing gap" graph that shows existing home sales (left axis) and new home sales (right axis) through June. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales. The flood of distressed sales has kept existing home sales elevated, and depressed new home sales since builders haven't been able to compete with the low prices of all the foreclosed properties.

Flat or declining existing home sales is likely (as the number of distressed sales decline), while new home sales will sluggishly increase. That will eventually close this gap, but it will probably take a number of years.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

Earlier:
• New Home Sales declined in June to 350,000 Annual Rate
• New Home Sales graphs

by Calculated Risk on 7/25/2012 10:00:00 AM

The Census Bureau reports New Home Sales in June were at a seasonally adjusted annual rate (SAAR) of 350 thousand. This was down from a revised 382 thousand SAAR in May (revised up from 369 thousand). Sales in March and April were revised up too.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Sales of new single-family houses in June 2012 were at a seasonally adjusted annual rate of 350,000 ... This is 8.4 percent below the revised May rate of 382,000, but is 15.1 percent above the June 2011 estimate of 304,000.

Click on graph for larger image in graph gallery.

The second graph shows New Home Months of Supply.

Months of supply increased to 4.9 in June from 4.5 in May.

The all time record was 12.1 months of supply in January 2009.

This is now in the normal range (less than 6 months supply is normal).

The seasonally adjusted estimate of new houses for sale at the end of June was 144,000. This represents a supply of 4.9 months at the current sales rate.

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

This graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale was at a record low 41,000 units in June. The combined total of completed and under construction is at the lowest level since this series started.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In June 2012 (red column), 33 thousand new homes were sold (NSA). Last year only 28 thousand homes were sold in June. This was the third weakest June since this data has been tracked. The high for June was 115 thousand in 2005.

Even though sales are still very low, new home sales have clearly bottomed. New home sales have averaged 358 thousand SAAR over the first 6 months of 2012, after averaging under 300 thousand for the previous 18 months. All of the recent revisions have been up too.

So even though sales in June were below the consensus forecast of 370,000, this was still a fairly solid report given the upward revisions to previous months. Based on recent revisions, sales in June will probably be revised up too.
New Home Sales graphs

by Calculated Risk on 7/25/2012 07:01:00 AM

From the MBA: As Low Rate Environment Persists, Refinance Applications Reach Highest Level Since 2009 in Latest MBA Weekly Survey

The Refinance Index increased 2 percent from the previous week to its highest level since April 19, 2009. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier to its lowest level since June 22, 2012.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) remained unchanged at 3.74 percent, the lowest rate in the history of the survey, with points decreasing to 0.43 from 0.45 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Click on graph for larger image.

The first graph shows the MBA mortgage purchase index. The purchase index has been mostly moving sideways over the last two years.

Note: Yesterday Zillow reported record low mortgage rates in their survey: "30-year fixed mortgage rate on Zillow(R) Mortgage Marketplace is currently 3.35 percent, down seven basis points from 3.42 percent at the same time last week."

The second graph shows the refinance index.

The refinance index is at the highest level since 2009.

This increase in refinance activity is probably a result of both record low mortgage rates and HARP activity.

by Calculated Risk on 7/24/2012 09:28:00 PM

Perhaps a little good housing news on Wednesday, but first, on Europe from Tim Duy: Is There Even a Panic Button in Europe?

I didn't think it was possible, but my confidence in the ability of European policymakers to pull the Continent out of crisis continues to fall. This is saying a lot because I had virtually no confidence to begin with.
...
The Greeks were never given a bailout plan that had any hope of success.
...
Whether or not Greece can be forced from the Euro with little impact elsewhere remains to be seen. I doubt we will need to wait much longer to learn the outcome of Grexit. But the devastating train that is the debt crisis keeps rolling right along, currently crashing through Spain's economy.

And make no mistake, European policymakers have learned nothing from the Greek experience. One gets the sense that policymakers think the prescription was correct, but that the patient was simply unwilling to take the medicine. Where Greece failed, Spain will succeed ...

Europe is still getting "Schäuble'd" as policymakers continue to repeat the same mistakes. Oh well, the beatings will continue until morale improves.

On Wednesday:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the mortgage purchase applications and refinance indexes. I expect record low mortgage rates and more refinance activity.


• At 10:00 AM, the New Home Sales report for June is scheduled to be released by the Census Bureau. The consensus is for an increase in sales to 370 thousand Seasonally Adjusted Annual Rate (SAAR) in June from 369 thousand in May.