Revisions Boost New Home Sales, Suggest Stabilization, Economists Say
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U.S. new home sales fell marginally in June but the pace was much higher than expected due to +50k of revisions over the past three months. Economists were surprised by the report and said it may be a tentative sign of stabilization, though more data will be needed to confirm that.
Sal Guatieri, senior economist at BMO Capital Markets, said the report "paints a brighter picture (than previously portrayed), in the new housing market anyway." Yet he cautioned against being too optimistic, as things are still getting worse but only at a slower decline than in the past two years.
He said sales in both existing and new home sales appear to be stabilizing, but there's no sign yet of an actual pick-up or recovery. Mortgage applications are still weak, builder confidence is at historic lows and mortgage rates have turned upward recently, he added.
Guatieri added the pace of new home sales has to be consistent at the current level before calling for an actual turnaround, and while this may be the beginning, he noted this index has a history of volatility.
Sales fell 0.6% to an annual pace of 530k sales in June's U.S. Census Bureau report on Friday. April's new home sales were revised up to 542k from a previously reported 525k, while May's 2.5% decline to 512k was revised to a 1.7% decline to 533k.
Paul Ashworth, senior U.S. economist at Capital Economics, called the reduction of inventories to a 10-month supply "encouraging," but noted that level "remains well above normal and will continue to put downward pressure on prices for some time yet."
"Q2 sales fell at a 17.1% annualized rate, much less awful than the 44.9% drop in Q1," added HFE chief U.S. economist Ian Shepherdson.
"New sales are now very close to their population-adjusted low in 1982, after the last big bust, and we doubt they can fall a great deal further," he added.
The median sale price of new houses sold in June was $230,900, up from May's revised median of $227,700.
Regionally, the results were mixed. The biggest decline occurred in the South, where sales fell to 293k from 299k, while in the West sales fell 1k to 114k and sales in the Midwest fell 2k to 83k. Only in the Northeast did sales increase from the prior month, moving up to 40k from 38k.
The Census report follows the existing home sales report from the National Association of Realtors on Thursday, which fell more than expected to reach a new low in the nine-year index.
By Patrick McGee and edited by Nancy Girgis
©CEP News Ltd. 2008
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