June new home sales figures were released this morning. Here’s a recap of what they showed:
* New home sales surged 11% to a seasonally adjusted annual rate of 384,000 from 346,000 in May. That was stronger than the average forecast of economists polled by Bloomberg, who were expecting 352,000 sales. Regionally, sales rose 22.6% in the West, gained 29.2% in the Northeast, and shot up 43.1% in the Midwest. Sales dipped 5.3% in the South.
* The raw number of homes for sale continued to decline, falling to 281,000 from 293,000 in May. That’s the lowest reading going back to February 1998. The months supply at current sales pace indicator of inventory slumped to 8.8 months from 10.2.
* The median price of a new home fell 5.8% last month to $206,200 from $219,000 in May. On a year-over-year basis, prices dropped 12%, the biggest YOY decline since February.
What’s happening in the new housing market? Falling prices are generating more sales and clearing out the inventory glut. Specifically, prices declined 12% from a year earlier in June. That was the biggest annual drop since February. Sales spiked 11%, while the raw number of homes on the market dropped to the lowest level in 11 years.
The existing home market is struggling a bit harder, thanks to a continuing influx of foreclosed and delinquent properties. But overall, the tone of the housing news is generally improving. That’s a welcome sign after so many quarters of disappointment.
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London and New York go parallel.
This was already happened in London.
How about GDP?
Obviously, huge incentives to buy new homes. But will it be sustainable? I doubt it. Especially in places like Phoenix. Most of the new builds here are way on the outskirts (I mean miles and miles out of town). People see the pretty new home with granite countertops and huge upgrade incentives, and they buy without looking at the extreme commute they will have to get from their new build to a job in Phoenix Metro. It has happened before. Let me see, didn’t it just happen? The average person who buys these houses gets sucked in by the meaningless incentives (you don’t need granite counters), and they don’t think about other practical factors. Also, a lot of these homes are being bought by investor wannabe’s who think they will have no problem renting them. Sound familiar? Did we not just experience this? Well, the rental market is saturated here, and people are beginning to move to other parts of the country in order to get jobs. Good luck renting them. Also, this is the most active season of the year for real estate sales. Will this pace continue into the fall and winter? There is more to the data than just the numbers.