New Home Sales Show No Year-over-Year Growth in September 2011

Let us start with perspective – new home sales are less than 1/4 of the peak values seen in 2005 – and are running at levels last seen in the 1970’s when I bought my first house.

September 2011 new home sales data indicate the home sales volume of 25,000 is exactly the same as September 2010 – and is exactly the same as August 2011.  Using Econintersect’s usual methodology of seasonal adjustment to determine month-over-month will yield negative growth because of an obvious anomaly (noise) in the August & September 2010 data.

To correct for this anomaly –  it would be best to view new home sales growth using a three month moving average of 4.13% over 2010.  

The headlines of the data release:

Sales of new single-family houses in September 2011 were at a seasonally adjusted annual rate of 313,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 5.7 percent (±18.4%)* above the revised August rate of 296,000, but is 0.9 percent (±16.3%)* below the September 2010 estimate of 316,000.

The median sales price of new houses sold in September 2011 was $204,400; the average sales price was $243,900. The seasonally adjusted estimate of new houses for sale at the end of September was 163,000. This represents a supply of 6.2 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. Also the data is distorted by the first home buyer’s stimulus which required contract signing before 30 April 2010 – causing a data bubble and subsequent trough.

The broad bottoming process 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 no longer be against the very low sales after the collapse of the tax credit stimulus micro-bubble.

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