New Home Sales Disappoint In October - November 28, 2012
Sales of new homes eased back ever so slightly in October, coming in at an annualized rate of 368,000 units. That figure was off just nominally from the downwardly revised 369,000 homes sold, on an annualized basis, in September. However, expectations had been that sales would have totaled 387,000 homes in the latest month. Initially, the September figure had been estimated at 389,000 residences.
Sales have stabilized in the 360,000-370,000 area for the past half year, or so, after rising notably in the prior few months. The latest figures suggest that the recovery remains somewhat uneven, although the aggregate numbers continue to suggest a noteworthy recovery is under way. In fact, sales were still up 17% from a year earlier. New home sales are a much smaller market than sales of existing homes, or housing resales.
This mixed showing notwithstanding, the overall trends are positive. For example, the number of new homes listed for sale in October came to just 147,000. Such a supply would take 4.8 months to work down at the current sales pace. A six-month supply would represent a healthy inventory level according to most housing experts. Also, the median price of a new home last month was $237,700. That was 5.7% ahead of a year earlier. This pricing improvement would seem to parallel findings issued yesterday by Case Shiller, which also noted a nice year-to-year improvement in home prices.
The better real estate pricing comes at a fortuitous time, as we are now in the midst of the annual holiday shopping season. Thus far, retail sales have been decent--both in stores and over the Internet--with shopping on Black Friday and Cyber Monday generally reasonable, but not memorable.
All told, the economy is slowing in the current quarter from the pedestrian 2.0% growth rate of the July-through-September period. Estimates now are that GDP growth will approximate 1.4% in the final three months of 2012; our sense is that the rate of increase may be a tad less, in the range of 1.2%-1.5% for the period. Meanwhile, experts now forecast that housing will contribute as much as a third of projected GDP growth in the present three months.
Finally, home sales were mixed across the country last month, gaining ground in the Midwest (up 62.2%) and in the West (up 8.8%), and falling in the South (down 11.6%) and in the Northeast (off 32.3%). The Commerce Department also said that Hurricane Sandy, which affected sales over the final days of October, did so minimally. We think sales will be hurt materially more in November, as the lingering effects of the aforementioned storm should be sizable in the Northeast.
On the whole, this was a reasonable report, but hardly one that will give the housing bulls added ammunition going forward.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.