New house sales fall 0.7% in July to 5-month low

posted at 3:25 pm on August 23, 2011 by Ed Morrissey

The US housing market continues its exploration for a bottom, as today’s numbers from Commerce and HUD show.  Sales of new houses declined 0.7% in July, and June’s figures were also revised downward:

Sales of new single-family houses in July 2011 were at a seasonally adjusted annual rate of 298,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.  This is 0.7 percent (±12.9%)* below the revised June rate of 300,000, but is 6.8 percent (±13.5%)* above the July 2010 estimate of 279,000.

The median sales price of new houses sold in July 2011 was $222,000; the average sales price was $272,300.  The seasonally adjusted estimate of new houses for sale at the end of July was 165,000.  This represents a supply of 6.6 months at the current sales rate.

The last time the annualized sales rate dropped below 300,000 was in February of this year.  Economists expected a decline of 0.2%, which of course makes this outcome unexpected — for Reuters, anyway:

New single-family home sales fell more than expected in July to hit a five month low and the prior month’s pace was revised down, though the supply of homes available on the market dropped to a record low. …

Economists polled by Reuters had forecast sales at a 310,000-unit rate.

The miss on expectations is slightly worse than the percentages indicate.  It’s 4% below expectations, and 4.7% below the initial June report levels.

Reuters is correct that inventory has finally begun to decline, which is good news long term for the new-home market.  It’s been bad news for the construction industry, though, because the reason for the decline has been that builders have cut back on building.  The market has had a glut of new homes on the market while still dealing with a glut of foreclosures, which has depressed both the new- and existing-home markets’ sales.

Still, the rate of decline is fairly low, comparatively speaking to what we have seen in the last couple of years.  Combined with the long-overdue constriction of inventory, we may finally be reaching a rational bottom in this market, which will eventually allow for real growth when real job growth takes hold.  Unfortunately, it appears that the Obama administration is about to reach for more short-term gimmickry on jobs and perhaps in the housing markets again, which will only make it more difficult to reach the rational equilibrium these markets desperately need.

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Politico said that leading from behind is good.

Schadenfreude on August 23, 2011 at 3:27 PM

Blame the earthquake!

Nevermind that these are July numbers and the earthquake came at the end of August.

UltimateBob on August 23, 2011 at 3:28 PM

Reuters is correct that inventory has finally begun to decline, which is good news long term for the new-home market

Inventory is down because the big banks and local banks are giving the foreclosed houses back to the community, who are now tearing them down.

Knucklehead on August 23, 2011 at 3:29 PM

It would be interesting to see this broken out by state.
Would not shock me to see lib states with insanely overpriced housing skewing the average here.
The fact that some homes in a crappy neighborhood here in Cali still go for $450,000 + is shocking and one of the reasons we are moving out of the state early next year. Sucks to leave the extended family behind, but it really is too toxic to raise kids with the prices out here among other things.

BakerAllie on August 23, 2011 at 3:30 PM

There are a ton of new houses being built in Texas. Just sayin.

txag92 on August 23, 2011 at 3:33 PM

It’s been bad news for the construction industry, though, because the reason for the decline has been that builders have cut back on building.

So construction has declined even more than demand declined.

If they report positive GDP growth again, I’ll really be wondering what is driving it.

forest on August 23, 2011 at 3:35 PM

This is what happens when your in a repression.

docflash on August 23, 2011 at 3:38 PM

For the 1000th time…it’s the price stupid. Plenty of houses are selling. I know, I was outbid on 2 this summer. Both of these houses were priced well. Very well actually. Yet I see houses that have been for sale for 2+ years still sitting there. And will be for sale 2 year from now as well since the owners still think it’s 2006.

angryed on August 23, 2011 at 3:42 PM

Unfortunately, it appears that the Obama administration is about to reach for more short-term gimmickry on jobs and perhaps in the housing markets again,

Rabbits-in-hats, hardest hit….

ted c on August 23, 2011 at 3:42 PM

It would be interesting to see this broken out by state.
Would not shock me to see lib states with insanely overpriced housing skewing the average here.
The fact that some homes in a crappy neighborhood here in Cali still go for $450,000 + is shocking and one of the reasons we are moving out of the state early next year. Sucks to leave the extended family behind, but it really is too toxic to raise kids with the prices out here among other things.

BakerAllie on August 23, 2011 at 3:30 PM

Just got our house here in California up on the market this week. So, far we have one showing scheduled, but the brokers tour isn’t coming through until Thursday. Hopefully, we’ll see some more action after that. Open houses both days this weekend. I’m hoping this doesn’t take too long. I’d like to get started on my life in Texas.

trigon on August 23, 2011 at 3:44 PM

angryed on August 23, 2011 at 3:42 PM

I agree. My neighborhood has at least 15 homes I can think of that haven’t sold for 2 yrs. I have been nosy and checked the pricing…and the trend is that they still seem to think that they can get out of it what they paid for it (or more!). Markets change, though, and until they rethink their pricing strategy those houses (and they are nice houses) will continue to sit. It’s too bad, it’s hurting my neighborhood.

search4truth on August 23, 2011 at 3:49 PM

For the 1000th time…it’s the price stupid. Plenty of houses are selling. I know, I was outbid on 2 this summer. Both of these houses were priced well. Very well actually. Yet I see houses that have been for sale for 2+ years still sitting there. And will be for sale 2 year from now as well since the owners still think it’s 2006.

angryed on August 23, 2011 at 3:42 PM

Are you sure it isn’t just a result of government regulation? From what I’ve heard, it’s new regulations passed down from Obama that’s hurting industry. How can you expect builders to build with regulations in their way?

If this country removed a few regulations it would see economic growth rebound overnight.

bayam on August 23, 2011 at 3:50 PM

bayam on August 23, 2011 at 3:50 PM

Interesting troll attempt.

Good solid B+

strictnein on August 23, 2011 at 3:53 PM

Lobsters in Martha’s Vineyard unaffected. Lobster bibs in short supply due to ongoing strike by LBMoA.

Oh what a world ……. what a world.

fogw on August 23, 2011 at 3:53 PM

Locally, the business section reports that they expect an UP TICK in foreclosures in the coming months. Wonder if that has anything to do with the UP TICK in unemployment to 12%

Thank God the recession is over!

GarandFan on August 23, 2011 at 3:53 PM

How can you expect builders to build with regulations in their way?

If this country removed a few regulations it would see economic growth rebound overnight.

bayam on August 23, 2011 at 3:50 PM

I agree with the last sentence, but don’t really think it applies to the residential housing market. Given the economy, you have people putting fairly new homes on the market that were built in the last 12 years for pretty decent prices (depending on where you look, of course.) I don’t see the point in having this drive to get a brand new home when you can probably get the equivalent for cheaper and it will have more established and nicer looking landscaping than new construction. It just doesn’t make much fiscal sense for your average buyer to need something custom built or newer than 3 years old.

BakerAllie on August 23, 2011 at 3:56 PM

Nevermind… Apparently my troll spidey-sense isn’t working too well this afternoon..

BakerAllie on August 23, 2011 at 3:57 PM

Heh!

I went to Reuters and searched for “unexpectedly”. 7860 results. The first page of results covers the last 5 days. They never know what to expect.

http://www.reuters.com/search?blob=unexpectedly

hisfrogness on August 23, 2011 at 3:58 PM

Are you sure it isn’t just a result of government regulation? From what I’ve heard, it’s new regulations passed down from Obama that’s hurting industry. How can you expect builders to build with regulations in their way?

If this country removed a few regulations it would see economic growth rebound overnight.

bayam on August 23, 2011 at 3:50 PM

You’re right.

Obama’s polciies are exactly why the people are holding on to the 2006 dream. Policies like bailing out bank. Policies like allowing the unemployed to live mortgage free in the homes. Policies like Holder pushing banks to lend money to people on welfare.

All this is distorting the housing market. If Obama just let market forces alone, housing would be fine. Prices would plummet. And at some point houses would be so cheap that investors would buy them.
Instead millions of homes sit on the market for years and years.

So yes Bayam, you are 100% correct. Get rid of the damn red tape that Obama has imposed and housing will be just fine.

angryed on August 23, 2011 at 3:58 PM

What PBHO needs to do is give these houses to the indigent so the demand will go up. Sure the places will look like hell in two years because the new owners won’t give a shiite, and that will drop the values of everyone around them, but at least the inventory will have been reduced.

Bishop on August 23, 2011 at 4:01 PM

Nevermind… Apparently my troll spidey-sense isn’t working too well this afternoon..

BakerAllie on August 23, 2011 at 3:57 PM

We need to coin a new phrase. Trolldar.

It’s similar to Gaydar, except that it allows you to detect a troll rather than someone who lives an “alternative lifestyle.” Not that there’s anything wrong with that.

UltimateBob on August 23, 2011 at 4:03 PM

Oh, and the reason a few houses around this area haven’t sold is because someone has broken into them to steal just about everything down to the copper tubing. One place even had the main floor gutted of its carpet and padding.

Bishop on August 23, 2011 at 4:03 PM

So yes Bayam, you are 100% correct. Get rid of the damn red tape that Obama has imposed and housing will be just fine.

Yes, the elimination of a few government regulations would repair the housing industry. The world is so simple to some people.

Policies like bailing out bank.
angryed on August 23, 2011 at 3:58 PM

Actually TARP was passed by Bush.

bayam on August 23, 2011 at 4:05 PM

What PBHO needs to do is give these houses to the indigent so the demand will go up. Sure the places will look like hell in two years because the new owners won’t give a shiite, and that will drop the values of everyone around them, but at least the inventory will have been reduced.

Bishop on August 23, 2011 at 4:01 PM

Already under way….

250K foreclosures to be turned into Section 8 Rentals

angryed on August 23, 2011 at 4:06 PM

Bayam, yes deregulating markets works. Real estate is no exception. Right now your boy wonder in Martha’s Vineyard is spending trillions propping up a housing market that will keep falling. Prices will fall one way or another. They can fall with trillions of tax dollars wasted or without. The boy wonder chooses the trillions wasted option. Were he to stop that insanity, housing would recover within 6 months.

It’s econ 101. But for a leftard troll, I know that’s too much to expect you to comprehend.

angryed on August 23, 2011 at 4:08 PM

angryed on August 23, 2011 at 4:06 PM

One of those places may be near me. Drove the bike around the hood last weekend and saw a gaggle of ragged cars unloading in front of what was once a pretty nice house; let’s just say the people doing the unloading matched the cars. I got some slightly mean looks and gave them one in return.

Bishop on August 23, 2011 at 4:24 PM

New house sales fall 0.7% in July to 5-month low

It is Bush’s fault

Oopsdaisy on August 23, 2011 at 4:34 PM

Yes, the elimination of a few government regulations would repair the housing industry. The world is so simple to some people.

bayam on August 23, 2011 at 4:05 PM

While over regulation is clearly a complete myth to Obama’s kneepad brigade, like Bayam.

Chuck Schick on August 23, 2011 at 4:42 PM

Used homes are being flipped in Arizona. The guy sitting next to me at work can’t get his bids in fast enough looking to be a first time homeowner. Investors are buying 3BR homes for 60 grand, making renovations with small work crews, and then selling them 3 months later for twice that.

Since I’m 30%+ underwater, I’m glad to see it finally happening. Maybe I’ll break even some day – assuming Obamageddon doesn’t hit first.

Mr_Magoo on August 23, 2011 at 6:12 PM

250K foreclosures to be turned into Section 8 Rentals
angryed on August 23, 2011 at 4:06 PM

“Converting the homes into rentals may reduce ‘credit losses and help stabilize neighborhoods and home values,’ said Edward DeMarco, acting director of the Federal Housing Finance Agency, which oversees Fannie and Freddie.”

Yea, right. A bunch of Section 8 qualifiers will help stabilize neighborhoods and home values. And this from an objective source like the overseer of Fannie & Freddie. Talk about laying the groundwork for the WH.

Mr_Magoo on August 23, 2011 at 6:21 PM

Thanks a friggin lot President Obummer.

CW on August 23, 2011 at 6:45 PM