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

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.