New home sales measure the number of newly constructed homes with a committed sale during the month. The level of new home sales indicates housing market trends and, in turn, economic momentum and consumer purchases of furniture and appliances. Why Investors Care
| Released on 11/29/07 For Oct 2007 | ||||||||||||
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Highlights
The latest new home sales report indicates that troubles in the housing sector are getting worse not better. New home sales came in at an annual unit rate of 728,000 in October, compared against a steeply downward revised 716,000 in September that marks a nearly 12-year low. Year-on-year, new home sales are down 24 percent. One piece of good news is an easing in the glut of unsold new homes, at an 8.5 month supply vs. 9.0 months in September. The West, as in yesterday's existing home sales report, has the worst of it, showing a month-to-month decline of nearly 16 percent compared with gains across the other three regions.
Bloated supply and slow sales are finally beginning to take prices down, evident in yesterday's data on the existing-home side and evident in this report that shows a nearly 9 percent plunge in October for a year-on-year decline of 13 percent. The median price is now $217,800 vs. $207,800 for existing homes (down 5.1 percent year-on-year). Falling home prices will limit refinancing, especially important given the rising volume of mortgage resets, and will hurt home-related demand.
In separate data this morning, the government reported that home prices in the third quarter showed their first quarter-to-quarter decline in nearly 13 years. The housing sector is more than ever a risk to the economy, a factor that appears to guarantee a rate cut at the Dec. 11 FOMC. Financial markets showed no significant reaction to the report.
New home sales rebounded in September but partly due to a sharp downward revision to August sales. New home sales in September rebounded 4.8 percent to an annualized rate of 770,000 after falling 7.9 percent in August. The August sales pace was revised down to 735,000 from the initial estimate of 795,000. Supply on the market improved but remains a major problem for homebuilders. Months supply eased to 8.3 from 9.0 months in August but is still quite high.
New home sales Consensus Forecast for October 07: 0.753 million-unit rate
Range: 0.720 million to 0.766 million-unit rate
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There is no question that lower interest rates boost home sales. Other factors also impact housing decisisions, such as employment and income growth, and wealth stemming from stock market gains. |
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