Implications: New home sales once again blew away expectations, spiking sharply upward in April, surging to an annual rate of 504,000 and hitting a two year high. In addition, revisions came out for the past two years and sales had net gains of 87,000 homes at an annual rate. Inventories are also now at their lowest level since 1968. Today's blowout number is due to two factors. First, the homebuyer tax credit ran out at the end of April, so buyers rushed to take advantage of the credit. Second, a combination of an improving economy with homes that are substantially more affordable than they were a few years ago with extremely low interest rates and prices the lowest since 2003 have led people to start buying again. New home sales will probably have a pull back in the months to come as people pushed their purchases forward in order to get the credit, but we believe they will continue to trend upward over the next couple of years eventually getting to a 950,000 annual sales pace.
In other housing news, yesterday's price indicators were mixed. The Case-Shiller index, a measure of home prices in the 20 largest metropolitan areas, was unchanged in March (seasonally-adjusted), but up 2.4% versus a year ago. Meanwhile, the FHFA index, a measure of prices for homes financed by conforming mortgages, was up 0.3% in March, but down 2.2% versus last year.
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Posted on Wednesday, May 26, 2010 @ 10:39 AM
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