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 1/28/08 For Dec 2007 | ||||||||||||
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Highlights
There are no indications yet that the housing market is stabilizing, only that declines are deepening. Last week's existing home sales data showed a 22 percent year-on-year decline for December, now followed by today's new home sales data that show a 41 percent decline to a much lower-than-expected annual unit rate of 604,000 for a 4.7 percent month-to-month drop and the lowest rate in 12 years. The drop is leaving new homes sitting on the market with supply now at 9.6 months, up from 9.4 months in November and the worst reading in 27 years.
Price depreciation appears now to be accelerating, down 10.9 percent in December alone to $219,200 for a 10.4 percent year-on-year decline. Prices for existing home sales have been holding up better, but further declines in new prices, which given the bloated state of supply seems certain, will begin to drag existing prices lower. Retailers, consumer products makers and government policy makers have all been warning that a drop in home prices will be a serious negative for consumer health and consumer spending.
Treasury yields and the dollar fell in immediate reaction to the results. Watch for comments on the housing sector in the FOMC's policy statement on Wednesday.
New home sales in November fell 9.0 percent to an annualized pace of 647,000, the lowest level since 1995. The year-on-year level of sales has plummeted to minus 34.4 percent. The big issue to get housing construction back up is to get supply down. But supply is still weighing on starts with new homes on the market at 9.3 months. Supply a year ago was at 6.5 months.
New home sales Consensus Forecast for December 07: 0.645 million-unit rate
Range: 0.600 million to 0.700 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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