Yesterday, I asked whether we have found a bottom in the housing markets. For at least today, the answer is … no. New housing sales dropped 8.4% in June, much steeper than analysts expected:
Sales of new single-family houses in June 2012 were at a seasonally adjusted annual rate of 350,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 8.4 percent (±12.4%)* below the revised May rate of 382,000, but is 15.1 percent (±16.7%)* above the June 2011 estimate of 304,000.
The median sales price of new houses sold in June 2012 was $232,600; the average sales price was $273,900. The seasonally adjusted estimate of new houses for sale at the end of June was 144,000. This represents a supply of 4.9 months at the current sales rate.
On first blush, the Mortgage Bankers Association report earlier this morning looked like good news, showing applications for mortgages on the rise. However, that came from an increased interest in refinancing. Applications for purchases fell last week:
The MBA’s seasonally adjusted index of refinancing applications rose 1.8 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, fell 2.8 percent.
The refinance share of total mortgage activity rose to 80.8 percent of applications from 80.1 percent the week before.
According to Market Watch, analysts expected an increase in purchases for new homes. Prices also fell again:
Economists polled by MarketWatch had forecast new home sales to rise to an annual rate of 375,000 last month. Sales in May were revised up to a seasonally adjusted 382,000 from an initial reading of 369,000 – the best month of sales since April 2010. The median price of new homes, meanwhile, fell 1.9% in June to $232,600, the lowest level since January.
Reuters rep0rts that the median price dropped in relation to a year ago, too:
New U.S. single-family home sales in June fell by the most in more than a year and prices resumed their downward trend, suggesting a set back for the budding housing market recovery. …
The housing market had been improving in recent months, with new home construction in June hitting its highest level since October 2008 and confidence among home builders this month touching its best level in more than 5 years.
Last month, the median price of a new home fell 3.2 percent from a year ago, adding to the report’s weak tenor.
In other words, we haven’t found a low — at least in the new-home market. However, this should be the last to recover. Foreclosure inventories dropped considerably until the settlement earlier in the year which allowed banks to push forward on foreclosures, short-sale inventories have probably declined (although I couldn’t find any hard data on that segment), so the easy deals will be mostly gone by the end of the year. The inventory level in new homes is one bright spot in the report. At the current slow rate of sales, it will only take 4.9 months to clear the backlog — up from May, but still pretty low, historically speaking.
The real problem right now is a lack of qualified buyers, as I wrote yesterday. We won’t solve that problem until we solve the high rate of joblessness and despair in the American economy, and we won’t solve that until we change policies to produce stable tax, regulatory, and monetary policies that allow investors to accurately price out risk for a 2-3 year period. Until that happens, the best we can do is find a bottom in the housing markets and bounce along it for an indefinite period.
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