 | New home sales fall 12.4% in July |
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Implications: Let's not beat around the bush. Today's report on new home sales was abysmal, with sales falling to the lowest level on record, dating back to 1963. Part of this is due to the expiration of the homebuyer tax credit, which required buyers to sign a contract by the end of April. As a result, new home sales, which are counted at contract, increased to a 414,000 annual pace in April. Since then (May thru July), sales have averaged only a 291,000 annual pace. But there is likely more going on than just the credit. Due to heavy foreclosures and short-sales, many people who would otherwise be in the market for a new home can get a similar existing home that was built in the past decade. Typically, new home sales comprise 15% of all sales; lately, they've been less than 7%. Given a growing population, new home sales should increase over the next several years to roughly 950,000. But excess inventories of existing homes are slowing that process.
In other news this morning, the FHFA index, a measure of prices for homes financed by conforming mortgages, fell 0.3%% in June, the first month since February that the FHFA index has declined. The index is down 1.7% from a year ago, compared to a drop of 5.1% in the year ending in June 2009.
Click here to view the entire report.
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