Implications: New home sales declined slightly in August and remained in the very narrow and depressed range they have been in since May 2010. New home sales face a number of strong headwinds. Credit conditions remain tight even as mortgage rates decline. Also, builders are competing against like-new existing homes selling at steep discounts, including foreclosed properties and short sales. The good news in today's report was that the inventory of new homes for sale fell to the lowest level on record yet again in August. Notably, although the inventories of completed homes and those still under construction continue to fall, the inventory of homes not yet started increased the most in almost five years. This fits with other data suggesting that home building is at, or is very close, to an upward inflection point. The median price of a new home is down 7.7% versus a year ago while average prices are down 8.5%. However, in other recent housing news, the FHFA index, a price measure for homes financed by conforming mortgages, increased 0.8% in July after a 0.7% rise in June. In the past three months the index is up at a 7.4% annual rate, the fastest pace since early 2006, before the housing price collapse began. Still, prices are down 3.3% versus a year ago. On the labor market, new claims for unemployment insurance declined 9,000 to 423,000. Continuing claims for regular state benefits declined 28,000 to 3.73 million. These numbers are simply not showing a recession.
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Posted on Monday, September 26, 2011 @ 1:27 PM
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