The financial news networks are just loving the “better than expected” news on new home sales. It’s amazing the conclusions people will come up with by just reading headline news reports without delving into the details of an economic news release. The real details of today’s new homes report shows substantial weakness.
I’ve been banging the drum on the seasonality of housing for many months now. We see this every single year. The spring buying season leads to better than expected sales across the board. If you back out the seasonal adjustment you’ll actually notice that the climb in units was just 3K. Mark Hanson at Field Check makes an interesting point on the climb in units:
“One thousand homes selling in the Northeast and two thousand in the Midwest was the extent of the gain over May. Again, that many properties either got a Notice-of-Default or were foreclosed upon in CA TODAY alone.”
The unadjusted year over year figures show equally weak data. Prices are down 12% and sales are down over 20%:
Econoday notes the strength in the figures:
“But not all the news is great. Sales were given a boost by deep discounting as the median price tumbled 5.8 percent in the month to $206,2000. The year-on-year price change fell to minus 12.0 percent from May’s minus 4.5 percent. Evidently prices are finding their own level in what will help rebalance the market but will unfortunately increase negative equity and pressure on foreclosures.”
Onthe bright side, inventories of new homes came down from 10.2 months to 8.8 months. This is without a doubt a positive, but it’s important to note the strong seasonal trends at work here. The real test of the housing market will come in the 3rd and 4th quarters.
Source: Field Check Group