Friday, August 24, 2007

I'm Baaaaack -- With New Home Sales

OK -- short version. I thought one of by dogs was injured a whole lot worse than he actually is. Although there is one really funny part to the story. I got Sarge as a rescue dog about a year ago. He's always had a slight limp. I simply thought he was abused or something happened to him when he was living on the street. It turns out his right elbow has an old through-and-through gunshot wound. In other words, Sarge has an old war wound. Go figure.

Anyway, my boy will be fine. He's on anti-inflammatory and pain killers right now. In fact, I think he's a little stoned. But he's going to be fine.

Now, onto the new home sales data.

From CBS.Marketwatch:

Sales of new homes increased 2.8% in July to a seasonally adjusted annual rate of 870,000 as the inventory of homes for sale dropped for a fourth straight month, the Commerce Department estimated Friday.

Sales were stronger than the 820,000 annualized pace expected by economists surveyed by MarketWatch. See Economic Calendar. In addition, sales in June were revised slightly higher.

Sales are down 10.2% compared with last July. Read the full report.

"Given the volatility inherent in the data and the troubles in the mortgage market, however, it is unlikely that July represents a turnaround in housing trends," wrote Celia Chen, an economist for Moody's "At best, it will be the first sign of a slow and unsteady climb back to health."

You can see the figures here

A few points.

1.) I'm having a hard time buying the 2.8% increase. All of the homebuilders have announced poor results this quarter. None have even hinted at the possibility of a rebound. We've had a ton of mortgage lenders issue terrible statements about their business. And suddenly new home sales increase? I'm just having a hard time buying that.

2.) The big jump came from the West, which increased 22.4% from month-ago levels. For anyone who has been paying attention, the West (especially California) has gotten hammered over the last 6 months. That makes this increase hard to swallow. That doesn't mean it couldn't happen, just that the overall environment isn't conducive to that kind of pick-up in activity. For more information check out Calculated Risk, which has been all over the California market.

3.) The total inventory available for sale has decreased 6.9% from year ago levels. That is a very positive sign. One of my main concerns about the new and existing home sales markets is the incredible inventory overhang. As long as that has been out there I have been very bearish on real estate. It looks like we are starting to see this total drop a bit, which is a very good sign. However, we still have a long way to go.