New Home Activity - July

New Home Sales remain low.

For the last year, seasonally adjusted new home sales have been the lowest they have been since the 1960's.  Stiff competition from the used home market continues to impact new home sales.

Consequently, there has been little reason for builders to start new homes, as seen above.  New SFR starts have been wallowing at historic lows since 2009.

With a very low number of starts, and, a few sales, builders have been able to drive inventories to very low levels. 

Even with low sales numbers, the low level of inventory has driven the Months of Supply to nearly 6 months.

27,000 new homes were sold last month, barely beating 7/2010 levels.  However, with 61,000 homes currently in inventory, it wouldn't take much to bring inventory levels down to bare bones.  With seasonality swinging into the slower part of the year, the big question is what would it take to spur additional sales?  If sales can maintain at the 20,000 per month levels that were achieved last year, it would seem like inventory levels will continue to drop and months supply ought to get comfortably below 6.  Should that happen I don't expect a "building boom" but it would certainly support new home prices, and, improve builder's profitability.