July 2011 New Home Sales Continue Bottoming Process

July 2011 home sales continue to bounce along the bottom – although this is the third month since the stimulus ended that home sales have not been negative year-over-year. Keep in mind that a home sale is recorded in this index on contract signing – not title transfer.  A home sale could occur even before a permit to build is issued.

Because the first home buyer’s stimulus required contract signing before 30 April 2010, the stimulus effect for this index evaporated in April 2010.

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The headlines of the seasonally adjusted data:

Sales of new single-family houses in July 2011 were at a seasonally adjusted annual rate of 298,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.  This is 0.7 percent (±12.9%)* below the revised June rate of 300,000, but is 6.8 percent (±13.5%)* above the July 2010 estimate of 279,000.

The median sales price of new houses sold in July 2011 was $222,000; the average sales price was $272,300. The seasonally adjusted estimate of new houses for sale at the end of July was 165,000. 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.

June 2011 data has been revised downward by 1,000. After revision new home sales are still not contracting, which is good.  Econintersect remains convinced the US Census seasonal adjustment methodology is giving the wrong answer and our year-over-year measurements are more meaningful.  This process indicates that, for now, new home sales are showing a long bottoming process is underway with the precise bottom likely having occurred 3Q or 4Q/2010.

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.

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