New Home Sales Decline 9.3% in Report Bloomberg Calls "Solid"

Analysis from Bloomberg Econoday is often laughable. Today is another case in point.

New home sales decline 9.3% in December and there were significant negative revisions in both October and November. Yet, Econoday labeled the report "solid".

The headline 9.3 percent decline in new home sales for December masks what is actually a solid new home sales report. December's 625,000 annualized rate is the fourth best of the expansion and follows November's revised 689,000 rate which is the very best. And importantly supply moved into the market, up 3.9 percent at 295,000 units. On a sales basis, supply improved to 5.7 months from November's 4.9 months.

Prices were steady in the month with the median edging up 0.1 percent to $335,400 for, however, very modest year-on-year improvement of only 2.6 percent. But prices may have room to move higher given that the sales rate is up 14.1 percent on the year with supply up 15.2 percent.

The downward revisions in today's report are significant, totaling 69,000 going back to October but this is really no surprise given how volatile this report always is. But the bottom line is upward sales momentum, incoming supply and room for prices to move higher. Residential investment has been dragging down GDP in recent quarters but today's report points to a solid contribution for tomorrow's fourth-quarter report.

Synopsis

Supply increased because sales plunged. And year-over-year supply is up more than year-over-year sales.

Prices can always move higher of course, but Econoday's price statement is backward. It would make more sense to say: With supply up more than sales, there is room for prices to fall.

Yes, this was a good quarter for housing, assuming there are no additional negative revisions. But this was not a good report. Let's not confuse the two.

Mike "Mish" Shedlock

Comments
No. 1-10
MishMash
MishMash

I don't see where existing homes are distinguished from new construction in this. The supply is all homes as far as I can see. Pros may have more distilled numbers. In fact it would be rare to see, I believe, a supply of news homes that would represent 5.7 months worth. How would you measure that? 3/4 completed or more? New homes generally move faster than existing and don't sit.

thimk
thimk

Interesting observation:the number of supply months of new homes(5.7 months ) versus existing homes (3.2 months downward trend) . maybe cost per sq ft ?

Tony_CA
Tony_CA

Time will tell. I think being are underestimating the effect to the changes to the new tax law.

MntGoat
MntGoat

Tony_CA...Inventory was a lot higher in 2006 and mortgages much easier. So different variables today. But that doesn't mean prices can't fall some.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

Good answer DFW

Stories