New Home Sales Dip Slightly, But Housing Recovery Still On Track - September 26, 2012
At 10:00 A.M. (EDT), we received the latest report on the recovering housing market when the U.S. Department of Commerce issued new residential data for the month of August. At first blush, the report was decent. Although new home sales were down slightly on a sequential basis, they were well above the prior-year figure.
Specifically, sales of new single-family houses in August came in at a seasonally adjusted annual rate of 373,000. That figure, though down 0.3% from the revised July figure, was up 27.7% year over year. The consensus expectation called for sales of roughly 380,000 new units.
A geographic breakdown of the new home sales data also made for a nice reading. New home sales were up 56.5%, 16.7%, 11.5%, and 64.6%, year to year, in the Northeast, the Midwest, the South, and the West, respectively. The increases in the latter two regions are particularly encouraging, as those areas are the two biggest housing markets in the country, especially in terms of new residential construction.
The latest data—another positive snapshot of this recovering sector—come on the heels of last week’s positive reports on existing home sales and new residential construction. Both housing starts and building permits, two strong indicators of future home sales, were up markedly on a year-to-year basis. Also encouraging is the recent jump in home selling prices. Yesterday, the Standard & Poor's/Case-Shiller home-price index showed that prices increased by 1.6% for the 20-City Composite in July and today’s report noted that the median price of a new home increased a record 11.2% last month, to $256,000, which is the highest level since March, 2007. All these factors augur well for a continued recovery in this all-important sector of the U.S. economy.
However, we would be remiss if we did not warn investors that the nation’s stubbornly high unemployment rate (at 8.1%) and lack of significant jobs creation remains a big concern for the homebuilders. It stands to reason that an unemployed individual and/or one who is in fear of losing his/her job would likely not be in the marketplace for a new home, which for most is the biggest transaction of their lifetime.
Still, all in all, the latest data on new homes sales are yet another sign of a broadening housing market recovery. The construction and sales of new homes—though only a small fraction of the nation’s total home sales—is vital to the overall health of the U.S. economy as each new property built usually creates an average of three jobs for a year and generates close to $100,000 in tax revenues.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.