New Home Sales Could Have Improved (or not) in April 2011

According to US Census, new home sales are up 7.3% in April 2011 over March.   Econintersect could argue sales might be better, but would need to ignore 2010 data.

When you need a microscope to see the change – likely there is little change.

The difficulty in month-over-month analysis, is that if you have a previous month which is unusual – or that there are new normal characteristics – your quantitative analysis distorts a reasoned conclusion.

The facts are:

  • Prior to the Great Recession, March was a better sales month than April.  In the “New Normal”, April is better than March.
  • New home sales were a major component in driving GDP prior to the Great Recession.  As long is it continues to fall year-over-year, it is an economic headwind.
  • Year-over-year analysis shows March and April are down a seasonally unadjusted 22%.
  • Year-over-year data comparisons are corrupted because of the effect of the first time home buyers stimulus last year.  If 2010 data is ignored, home sales are no longer falling – but still only one-third of the pre-recession levels.

There is no evidence yet of a real bottom in new home sales, although Econintersect believes that one will appear in next few months.  It is difficult to see improvement in new home sales when (1)year-over-year data has been lower for 72 of the last 76 months (even with a stimulus), (2) it was down 22% year-over-year this month, and (3) sales are only 1/3 of the pre-crisis peak.

The facts still are not pretty.

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