Housing Data: Tell Me Something I Don't Know
By Tony Crescenzi
RealMoney.com Contributor
9/27/2007 11:33 AM EDT
Okay, so home sales fell sharply in August. This has the feel of, "Tell me something that I don't already know." For many weeks, we in the financial markets have been subject to immense amounts of bad news on the housing market, from the credit freeze to homebuilders' angst to a bevy of media reports on the state of housing market.
Given the gloom and the fact that home sales are now running so low that further declines, such as those seen recently, would put sales near zero, one can envision in 2008 a change in the way that sales figures will be perceived.
Sales declines will seem small compared to the recent experience, hence, home-sales data released in the year ahead are unlikely to feed the negativity that has smitten markets this year. Of course, if lower home prices, Fed rate cuts, rising rents, rising incomes and powerful demographics help spur bargain hunting, upside surprises might be seen now and then in the months ahead. I stress that context is the key here. Expectations and sales are now so low that there is much less room for disappointment than before.
In August, new-home sales ran at a pace of 795k, a 72k unit decline (8.3%) from July's pace and 30k below the consensus forecast. The figure is 594k below the peak of 1.389 million set in July 2005. In the same tenor as above, in terms of where markets are headed with respect to future sales data, it is probably a good thing that there is now a "7" handle on the home sales figure. Sales can only fall so far given population growth, now at about 3 million per year in the U.S., unless there is a severe economic recession that drives home-ownership rates sharply lower.
The amount of homes for sale is declining, with the figure at 529k in August, its lowest level since January 2006, down 8k from the previous month, 39k from a year ago. Homebuilders are acting decisively to cut inventories and have shown more willingness to cut prices than have individuals, which is helping to cut excess supplies. There remains an excess of over 200k homes, a figure much smaller than the two million of excess unsold homes in the existing home arena. |
