New Home Sales Data: 7 Year Low

There was no good news whatsoever in today's New Home Sales Data.

• Sales of new-homes dropped nearly 4% in February.

• This is the lowest reading since June 2000, according to Commerce Department data.

• On a year-over-year basis, sales were down 18.3%.

• Inventories of unsold homes rose 1.5% to 546,000. This represents an 8.1-month supply. Marketwatch notes this is the largest inventory in relation to sales since January 1991.

• On a year-over-year basis, the inventory is up 26.6%.

• The median price rose 2.8% sequentially - down 0.3% on a year-over-year basis, to $250,000.

This report is hard to reconcile with last week's Existing Home Sales; One of them is likely wrong, and I suspect the NAR-prepared Existing Home Sales is the dud . . .

Comments

[AlanBrochstein]

NAR (Resales) is based on closings, New Homes are based on contracts. Thus, today's data is more reflective. To throw an even more bearish spin: some of those inflated existing home sales are probably underwater sellers who are not able to afford their recent purchase and are moving on. That sucks and will continue to suck for new home sellers!

[JohnnyBitchdog]

The funny thing is that it may make sense for the builders to keep kicking out houses, even if they anticipate losing on the house build costs in order to generate positive cash flow on the overall transaction which includes the land.

I haven't looked at this in any detail, but they may be able to harvest losses on the house build by matching them against gains on the land, much of which must be several years old. Even if they breakeven on the house, the cash flow from getting the land off as well could be enough to drive positive cash flow as long as the market doesn't get much worse.......

In the end, they will probably cut their own throats by continuing to overbuild, but the delusion that things might come back soon may keep the home factories churning........

New business plan: In order to sell our land, we must build houses !

John Ewing.