New Home Activity

New Home Sales were reported by the Census Bureau this morning.  Sales came in at a SAAR rate of 300,000.

 The 300,000 rate is the lowest in recorded history.  The chart above (all charts from Calculated Risk) shows the dramatic cliff diving in sales since the peak in 2005.

 On a monthly basis, 29,000 homes sold.  2011 is lagging the artificially stimulated sales of 2009/10, but not by too much.

 Fortunately, Completed Inventory is nearing historic lows.  As of March, there were 73,000 finished homes on the market.  Homes under construction are at historic lows.  Permitted, but not started homes are looking very skinny.

 Months Supply is consolidating back towards "normal" levels with March coming in at 7.3 months supply.  The pullback in months supply is due more to the lack of starts (see next chart) than robust sales.

Starts have plummeted as builders play defense.  Monthly starts appear to have been around 35,000 which is slightly above March's sales.

The New Home Market continues to struggle against the Used Home Market.  Builders are still having trouble competing with all the distressed properties on the market.  New Home Inventory continues to dry up, by necessity, setting up a return to more profitable pre-sale activity for Builders.  The trick will be to come up with competitive products to match foreclosure & short sale listings on the market.  This will be difficult until more of the distressed properties are removed from the market.  Keep an eye on Existing Home Sales to see when this happens.