Apr 26, 2005

New Home Sales - Signs of Inventory Problems?

From Bloomberg:
Purchases rose 12.2 percent to a 1.431 million annual rate in March following a 1.275 million pace in February, the Commerce Department said today in Washington. Economists forecast a 1.19 million sales rate in March, according to the median estimate in a Bloomberg News survey.


Residential investment contributed 0.19 percentage point to the 3.8 percent rise in gross domestic product in the fourth quarter. While that was more than the prior three months, it was less than the 0.86 percentage point in the second quarter.

Sales rose in three of four regions. They increased 21.9 percent in the Midwest to 217,000 at an annual pace; 13.8 percent in the South to a record 733,000; and 9.9 percent in the West to 399,000. They fell 8.9 percent in the Northeast to 82,000.

The median price fell to $212,300 in March from $234,100 a month earlier. Compared with the same month last year, the median price is up 1.3 percent.

The number of new homes for sale fell to 433,000 from 437,000 in February. The median number of months those homes have been for sale fell to 3.6 months in March, the lowest since August 2003, from 4.3.

[emphasis added]
I saw that headline print and my first thought was about the high recent inventories and how the headline might not be that great if producers had blinked and lowered prices. The numbers give some support to that idea. Not a disaster but certainly something to watch when every headline is pointing out a record high.

I am getting pretty bearish on housing over the next 6 months. Like the rest of the market it probably pays to be patient after the recent weakness. I would not expect the housing stocks to reach for new hghs like new home sales did.

*update 12 PM - I have looked through the past median price data and am less convinced the price drop means anything. I have a natural contrarian reaction when I read the word "record" relating to monthly % changes though. The better interpretation is probably that if the U.S. consumer is hitting some sort of wall it has not showed up in housing data yet.

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