March New Home Sales: 1.213 Million
Submitted by
CalculatedRisk on Wed, 04/26/2006 - 6:01am (18 comments)
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A dead cat bounce? Perhaps.
Some more anecdotal updates:
At dinner with some friends last night, two of them were complaining about not being able to sell their residences -- one large house and one condo, both in highly desireable areas of Boston and Cambridge, respectively. They've both lowered the price several times and still gotten no bites. The house owner was advised by her RE agent to spend $1,000 on her yard to make the house more appealing ... so far she's resisting that idea.
Here's how Yahoo Finance describes the data:
Quite a different take from the Calculated Risk perspective...
it's all in the spin dan. it's like mad libs. ___ has had the largest increase/decrease in _____ time period. it's called reaching. the inventory is building and there isn't enough demand to sop it up. pricing pressure is building and that inevitably drives prices down.
Here is MarketWatch's take (Nutting):
"New home sales unexpectedly increased by 13.8% in March to a seasonally adjusted annual rate of 1.213 million, the highest level of the year, the Commerce Department estimated Wednesday.
The increase more than reversed the 10.9% decline in sales in February. It was far stronger than the mild increase to 1.10 million annualized that was expected by economists surveyed by MarketWatch.
Combined with the small increase reported in existing home sales on Tuesday, the report shows the housing market was much stronger in March than anyone had reason to believe.
Other housing market indicators, including mortgage applications, housing starts and builders' sentiment, are pointing to a softer housing market.
The strength in home sales, if it persists, could keep the economy growing faster than the Federal Reserve wants and could lead to higher interest rates than now expected.
New home sales are down 8.2% year-to-date.
The government cautions, however, that its housing data are subject to large sampling and other statistical errors. The margin of error is so large, in fact, that the government cannot say with confidence that sales rose at all in March.
It can take up to six months for a trend in sales to emerge. New home sales have averaged 1.22 million per month over the past six months, down from 1.23 million in February and 1.30 million in November.
The inventory of unsold homes on the market increased 2.8% to 550,000, representing a 5.5-month supply at the March sales pace, down from 6.3 months in February.
Median home prices fell 2.2% year-over-year to $224,200. It's the first time prices had fallen year-over-year since December 2003."
Dear Mr. CR
Went back and re-read your predictions for 2006. What strikes me is how right you are turning out to be. Just want you to know that it is easy for us sitting on sidelines to take shots at your comments; however, I, for one, really enjoy and appreciate your commentary. It is a parlor game for me, anyway.
However, I cant shake the feeling that this housing bubble will play out much differently than most other financial bubbles.
Talking to a friend who lives in suburbs of Detroit last night. He lost his job (selling office furnishings, company cutting back, we can guess why ). He has a dream house, wonderful wife and kids, and is the primary income for the household. I know that he is heavily leveraged and I also know that he will be clinging tooth and nail to his home. No game there!
Maybe the nature of credit has changed and most people now will go to their graves with tons and tons of debt.
Just thinking!
Thanks
Here is a nice assessment from CNN that clarifies that the huge jump was only from last month (Feb '06), and overall, prices and sales are BOTH down from last month and from this time last year, while inventory is wa sshigher than this time last year.
"He[economist Bob Brusca] noted that the report showed an unusual drop in prices from both February and a year earlier, which could be a sign that home builders are cutting prices to move a large supply of new homes now on the market.
"New homes sales sprang back [to] life like a zombie in a cheap horror flick," Brusca said. "And like that zombie, housing really is dead. Don't let all that twitching fool you."
He said that many of the new homes sold in March were probably built in a stronger real estate market.
And unlike existing homes, where sellers can live until they get an acceptable price, "builders can't live in these houses unless they have a lot of family," he said. "By and large they must finance them at rising interest costs.""
Hah! Dead cat bounce indeed, as sellers of existing homes will soon realize that as builders drop their prices, nobody's going to buy their overpriced home who list price they refuse to drop when they can spend an extra $25K and get a brand spanking new home, freshly reduced!
Builders have cut prices to move units. They're also now starting to build less expensive models to meet the sweet spot of current demand. The result will be flat to slightly declining YoY median for the new home market sector.
New home sales soar in March but price weakness shown - Apr. 27, 2006
Detroit Dan wrote, Quite a different take from the Calculated Risk perspective...
I was just going to post the same thing and ask what the hell they're referring to. Looks like they're talking about Mar over Feb. But since Feb was extremely weak, that's a silly way to put it.
Richard wrote, it's like mad libs.
Huh?
Dear Liberal
I did Mad Libs as a kid, check out
http://us.penguingroup.com/static/packages/us/yreaders/madlibs/fun.html
Regards,
"I'd be very concerned if New Home Sales fall below about 1.05 million units annual rate for several months."
If sales fell to 1,05 million units annual rate, this will boost the "months of supply", even if less new houses are built.
see the month for february. I guess at 1 million sales there would be 7 months of supply (without any changes in the number of houses available for sale).
So if sales plummet to the long term mean ... months of supply will sky rocket.
What's the long term mean for new home sales (over the last 30 years or so) : 700 000 ?
Kudos to Calculated Risk for the clear presentation of a large amount of data. This blog accurately depicts lots of data and shows what is actually going on with sales, inventory, and months of supply by contextualizing the data. If mainstream media could present data this clearly, they would be way better at what they do. Instead, they present misleading figures and comparisons due to omitting large amounts of data.
Home sales jumped in March, but they decreased y-o-y compared to 2004 and 2005. Inventory is way above what it was last year. Long-term, it looks like we are starting to see a breakout in inventory and supply, which should eventually lead to price decreases. Thank you CR, for presenting enough information for the reader to make their own conclusions.
Prices dropped a lot; sales higher than expected. The builders didn't want to keep the already-built homes on inventory so they chopped prices to move them. Clear enough.
The million dollar question is when will we see a significant drop in sales and prices. So far we have fractional changes. As long as we continue to see interest only loans out there, there will be plenty of fools buying overpriced houses. This bubble may not really burst for another 12 months.
I have predicted this sort of bounce in the past, but it never lasts. What happens is that prices start to drop so first time buyers with finance but priced out of the market bite. There aren't so many of them around and they aren't selling to buy so it doesn't last. And of course this "reserve buyer" group isn't there any more.
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