Let us start with perspective – new home sales are less than 1/4 of the peak values seen in 2005. Yet this does not stop a positive trend from continuing with the August 2011 new home sales data which is documented by Econintersect.
Because the first home buyer’s stimulus required contract signing before 30 April 2010, new home sales have had positive trend lines for the last year, after that stimulus micro-bubble collapsed. And in August 2011, new home sales are up 13.0% year-over-year – with the last four months of data confirming this sector is finally in a recovery stage (and no longer a drag on GDP).
The headlines of the seasonally adjusted data is negative which is the exact opposite of Econintersect’s positive analysis of the data:
Sales of new single-family houses in August 2011 were at a seasonally adjusted annual rate of 295,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.3 percent (±13.9%)* below the revised July rate of 302,000, but is 6.1 percent (±18.8%)* above the August 2010 estimate of 278,000.
The median sales price of new houses sold in August 2011 was $209,100; the average sales price was $246,000. The seasonally adjusted estimate of new houses for sale at the end of August was 162,000. This represents a supply of 6.6 months at the current sales rate.
With new home sales at 25% of past rates, whatever your interpretation of the new home sales data is not significant enough to matter. But it is interesting to note this is happening in the middle of an economic soft spot.
The US Census seasonal adjustment methodology is giving the wrong answer and our year-over-year measurements are more meaningful. In such a broad bottoming process a bottom for new home sales in 2010 may not be confirmed or denied for another year or more. The critical factor will be whether the one-year positive trend can continue as year-over-year comparisons will not longer be against the very low sales after the collapse of the tax credit stimulus micro-bubble.