To use a phrase widely attributed to long-time Hall of Famer Yogi Berra, it was deja vu all over again. That often heard, but possibly never uttered, phrase seems most appropriate today when analyzing the latest housing metric--specifically, sales of new homes for July. That is because they were down again. True, they were not materially lower, but were off just enough to suggest that we are at best in a long and painfully slow bottoming out process in this beleaguered part of the aggregate economy.
In all, sales dipped slightly to 298,000 annual units in July. That was incrementally below the June total of 300,000 homes. The June figure, it should be noted, represented a downward revision from an initially estimated 312,000 homes. The July metric was the lowest in five months, as the housing sector continued to struggle amid a sluggish economy.
Home sales have now fallen each month since April, when such sales were at 326,000 annual units. Expectations had been that sales would come in at 310,000 homes in the latest month. So the result was clearly a disappointment, if a modest one.
Importantly, sales are just about 40% of the 750,000 annual total is generally considered to be healthy. Observers believe that prospective buyers are putting off purchases because they are worried about their jobs and are unconvinced about the direction of home prices. The difficulty in securing credit in some cases and unrealistic price expectations among some home sellers are also constraining this sector. Finally, some potential buyers are deciding to go shopping in the existing home markets, where prices are generally lower, and sellers may be more amenable to cutting their asking prices still further.
All told, the supply of homes on the market remained at 6.6 months in July. That is level with the June total, and a little above the six months supply that economists consider to be healthy. The report, meantime, showed that sales fell in two of the four areas of the country, declining in the South (by 7.4%) and in the West (by 5.9%). Unfortunately, these two areas are the largest of the four, often accounting for more than three-quarters of the market. Sales doubled in the Northeast, the smallest market, and were up 2.4% in the Midwest.
In sum, the report was unexceptional, but not terribly surprising, or a game changer for this struggling industry.
At the time this article was written, the author did not have positions in any of the companies mentioned.