April Home Sales Recap
Home sales for April came out in the last two days. As usual, the message and headline presented by the media substantially deviated from the truth.
New Homes
Yesterday’s new home sales figures earned the headline, New home prices plunge, sales soar. That doesn’t sound too horrible. Prices are down, sales are up. That stands to reason. The truth is prices are down and sales are down. Let’s look at the data.
A big drop in the price of the typical new home sold in April spurred much better-than-expected sales, according to the latest government reading on the battered real estate and home building market released Thursday.
New homes sold at an annual pace of 981,000 in April, up 16.2 percent from the revised 844,000 pace in March. Economists surveyed by Briefing.com had forecast an 860,000 rate in April.
Great news, right? So what if there were more new homes sold in April than March. That stands to reason. How did April 07 compare to April 06 - the most important comparison available? Up? Nooooo.
But even with the April spike factored in, April sales came in 10.6 percent below year-earlier levels.
So now how was that headline “Sales soar” truthful? Maybe if the writer considers a 10.6% drop soaring.
There was some good news in this report though. The months of inventory available has dropped by over two months. This is significant as it means prices should begin to stabilize for new homes. I would expect sales will continue to level off for much of this year until demand and consumer sentiment picks up again.
Kasriel pointed out that the median number of months it takes builders to sell a completed home has risen every month for the past seven. It now stands at 6 months, the longest time it takes them to move a completed home since 1993, and it’s almost double the 3.4 months it took them to sell a home as recently as September.
However, the faster sales pace in April helped take the estimated months’ supply of homes on the market down to 6.5 months from 8.1 months in the March report.
Existing Homes
This morning April’s existing homes report came out. The headlines were equally inconsistent with the data. CNN’s Money section screamed, Weakest home sales since ‘03 hit values! While the trend is dipping down, I’m not concerned, yet, that a housing crash is in progress. The volume of sales slowed in the existing home market and the median price fell slightly.
The group’s closely watched report showed the annual pace of existing home sales fell 2.6 percent to 5.99 million in April, down from a revised 6.15 million pace in March. It’s the first time the pace of sales fell below the 6 million level since June 2003. Economists surveyed by Briefing.com had forecast a little-changed sales rate of 6.13 million.
The median price of a home sold in the month was $220,900, down 0.8 percent from the $222,600 price for a typical home sale a year earlier.
Again, I’m not bothered too much because the comparison is 2006’s record high. New home’s median price dropped nearly 11% in April and had a 10% loss in volume, while existing homes had a price drop of only .8% with a 2.6% drop in volume. Very interesting.
What I am concerned with is the amount of existing home inventory. That has indeed jumped to glut levels.
The slower sales pace and a 10.4 percent increase in the inventory of homes on the market in the last month to 4.2 million means there is now an 8.4 month supply of homes for sale nationwide, up from a 7.4 month supply in March.
It is encouraging to know the inventory levels of new homes is dropping as that should place residual inventory pressure on existing homes. Apparently market conditions and consumer sentiment are saying it’s a good time to buy a new house over existing older inventory. Time will tell as we move deeper into the summer home buying season.