Implications: New home sales came in exactly as the consensus expected in November, at an annual pace of 315,000. Sales remain in the narrow range they have been in since May 2010. Sometime over the next several years, new home sales will rise to an annual pace of about 950,000. But, given tight credit conditions and the large inventory of bargain-priced existing homes – particularly those in foreclosure or being sold short – this will not happen anytime soon. The best news in today's report was that the months' supply of new homes fell to 6.0 months in November, the lowest since early 2006, when the housing bubble was just starting to burst. Before the late 1990s, a six months supply would have been considered normal. The number of unsold new homes under construction is at a new record low and the number of unsold completed new homes is approaching a record low. This is exactly what needs to happen for there to be a sustained recovery in housing. One positive sign is that builders are wise to the rapid reductions in inventories. The inventory of new homes where construction has yet to start (permits are issued, but building has not begun) is gradually rising – up 8% from a year ago. In other words, builders are getting ready for an increase in demand. On the pricing front, the median new home price is down 2.5% from a year ago. Average prices are down 13.8% from a year ago, but that's because prices spiked temporarily late last year, so the comparison is skewed. In other recent home price news, the FHFA index, a measure for homes financed by conforming mortgages, declined 0.2% in October and is down 2.8% from a year ago.
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Posted on Friday, December 23, 2011 @ 10:41 AM
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