Monday, June 25, 2012

With existing home inventories tight, new home sales have stabilized

New single family home sales in the US rose more than expected during May.
Reuters: (Reuters) - New single-family home sales surged in May to a two-year high and prices rose from a year ago, further signs the housing market recovery was gaining some momentum.

The Commerce Department said on Monday sales jumped 7.6 percent last month to a seasonally adjusted 369,000-unit annual rate, the highest since April 2010.

That was well above economists' expectations for a 346,000 pace and the highest since April 2010, when sales were inflated by a homebuyer tax credit.
This provides further evidence to recent reports of tight inventories in the existing single family home markets.  People are not in a rush to sell existing homes at low prices and the shadow inventory is not flowing into the market at the rate some have been expecting (while "shadow demand" is growing). Tighter inventories in the existing home markets are increasing demand for new homes.

Clearly this volume looks puny relative to recent history. Also anecdotal evidence suggests that homeowners are waiting for prices to firm up to sell, thus limiting the rate of appreciation (at each price point, new exiting home inventory will enter the market). Nevertheless it seems that new home sales have now stabilized.

US New One Family Houses Sold  -
Annual Total SAAR (U.S. Census Bureau;
Note: the spike and drop in 2010 is due to the First-Time Homebuyer Credit)
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