New Home Sales fall further in March

The U.S. Census Bureau and the Department of Housing and Urban Development released the New Homes figures. New Single Family Houses were at a seasonally adjusted annual rate of 526,000. This is 8.52% below the revised February 2008 rate of 575,000 and 36.63% below the March 2007 rate of 830,000. Economists had forecast that sales would come in at 580,000.

This previous post has a chart going back to 1960.

The 3 month average of the median new homes sales price of $234,900 is down 8.22% from where it was a year ago at $255,933 (in February the average was down 6.01%). Monthly sales prices can be very volatile. January 2008 was at $232,900, February 2008 was at $244,200, and March 2008 was at $227,600. The S&P Case-Shiller Home Price index also uses a 3 month average to calculate the monthly index. There are officially 460,000 new homes for sale. This number is underestimated because the U.S. Census Bureau does not account for cancellations. At the current sales rate there is 11.0 months supply of inventory. If there was not another house built this year, it would take that approximately that long to sell the current inventory.

More new homes are currently being completed than are being sold, so this number is going to continue higher. Last year, 905,000 new homes were completed for sale. From November 2006 to October 2007, only 829,000 new homes were sold (new homes are calculated when a home goes into contract—the sale is usually completed a few months later). The U.S. Census Bureau has not yet released the figures for the new homes completed for sale for the first quarter yet. However they do release the figures monthly for the new homes completed for any purpose (for sale, for owner use, and for rental use). Homes built for sale has recently averaged about 75% of the total homes built. Using 75%, the number of new homes completed for sale for the first quarter will total approximately 152,825. Only about 146,000 new homes will have sold during that period (based on contracts from November 2007 to January 2008). The growth of excess inventory is slowing. However, the first quarter is also the slowest quarter for completions for the year due to weather and selling patterns.

New Home sales usually spike up at this time. March through June are the strongest months of the year for new home sales. November through January are the slowest for the year. Instead of picking up in pace, sales have slowed down further. Using 2001 and 2005 for comparisons, sales for March are at 54.3% of 2001’s pace and only 40.2% of the pace during the boom year of 2005. This is the slowest it has been during this housing slump.

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