New Home Sales Edge Higher but Remain at Low Levels
A Bloomberg survey had forecast new home sales would rise to a 300,000-unit annual pace in September. New homes sales totaled a revised 288,000-unit rate in August, and 285,000 in July. The all-time low annual rate -- 282,000 -- was set in May.
New home sales are now down 21.4% in the past year, compared to September 2009, an improvement from the 28.9% year-over-year decline recorded in August.
However, investors need to keep the past month's gain in perspective, given the massive contraction in new home sales triggered by the recent recession. New home sales are down about 62% from the average 800,000-unit annual rate during the Roaring 90s, a period of strong U.S. GDP and job growth.
New home sales are also about 72% below the average 1.1 million-unit annual rate recorded during the 2002 to 2007 housing bubble, but almost no economist expects the U.S. housing sector to return to that lofty, problematic-mortgage-fueled level, due to more-modest gains in household formation, among other factors.
Home inventories provided a qualified bright spot, falling to an 8.0-month supply in September at the current sales pace, down from an 8.6.-month supply in August. Even so, inventories are still well above normal inventory levels of three to five months.
In September, new home sales rose in every region, except the West, climbing 3.4% in the Northeast and 3.2% in the South, skyrocketing 60.6% in the Midwest, but falling 9.9% in the West.
Median Home Price Rose in September
Meanwhile, the median sales price edged up 1.5% from August to $223,800, and up 3.3% compared to a year ago, in September 2009.
September's new homes sale report was not much to write home about. True, sales did rise for the second straight month, but the 307,000-unit rate remains close to the 47-year low of 282,000 recorded in May.
In other words, the new home sales market has only a low-pulse reading. Sales hit a 2010 high rate of 414,000 units in April, one month before the initial home-buyer credit expired, but then plunged after it did expire and have struggled to rise since.
These recent figures indicate that the new home sector, weighed down by a sub-par U.S. economic recovery -- is not generating enough organic demand to vault sales higher. Further, sales remain low despite mortgage rates that have made houses more affordable for those buyers who qualify. A considerable number of Americans are holding off buying a new home, with many probably waiting to see if the U.S. economy strengthens -- something that would help support the value of their possible home investment.