Feb New Home Sales

The U.S. Census Bureau and the Department of Housing and Urban Development reported new home sales hit the skids in February.  The number of homes sold, at 250,000, represents a month-over-month decrease of 16.9 percent! The year-over-year result is a decline of 28 percent relative to February 2010 when we saw a new home sales figure of 347,000.

Units sold was not the only number in the report to fall drastically during the month.  The median and average home prices fell 13.9 percent and 7.2 percent respectively. The median home price was $202,100 versus $234,800 in January.  The average price went to $246,000 from $265,300 a month earlier.  All the while, inventories climbed to 8.9 months of supply or 186,000 new homes for sale.  Remarkably, the current supply of new homes in absolute terms is close to record lows, running at roughly half the norm.

Of the two housing indicators Atlas writes about, this is the more forward looking.  It has to do with when a sale is tallied.  When a contract is signed, the new home sale is counted, as opposed to existing home sales which wait until the purchase is complete. If this report is any indication on how the larger existing home sales market will look in the coming months, the housing market is headed for a period (no telling how long) of dismal performance. This may ultimately be exacerbated by a market which is about to lose some of its backing from the Federal Reserve as the latter ends its interest rate support in the summer by shuttering their QE2 program.  Meanwhile FHA wants to take a smaller role in loan guarantees (see our posting on existing home sales).  All this, combined with the sorry state of employment and a steady deterioration in home prices dishes up a bitter cocktail indeed.   In the constant struggle between supply and demand, it is remarkable that the latter appears disinterested despite the shrinking absolute total of the former.