Tags: houses | home | sales | supply | us | economy

Low New-Home Supply May Mean We've Hit Bottom

By Michael Carr   |   Tuesday, 24 May 2011 11:03 AM

The Census Bureau tracks new-home sales and reports a variety of data every month. Headline numbers are the number of homes sold, the average sales price, and the supply of unsold homes on the market.

Sales in April were up 7.3 percent compared to last month, but down 23.1 percent compared to a year ago. Weather leads to sharp monthly swings in sales data and the month-to-month number is rarely meaningful. The huge decline from last year shows that home construction is still in its worst slump since World War II.

Supply fell to about 6.5 months of inventory, on a seasonally adjusted basis. Seasonal adjustments are designed to take the swings caused by weather and other variables out of the data and may work well in normal markets. However, the home market is anything but normal now. Several days ago we learned that banks own about 800,000 homes, more than twice the number of new homes that will be sold this year.

Seasonal adjustments have become little more than guesses in most economic data series. They are always revised later. Looking at the number of homes for sales without that adjustment, we see that supply has fallen to 5.5 months, its lowest level since May 2006, and a big drop since November 2010 when there was a 9.5 months supply.

Lower supply of new homes is the first sign of a bottom in real estate.

When builders stop building, older homes can be taken off the market by buyers. Housing bear markets have usually ended when this number falls under 4 months of supply, so we are seeing the first positive news for housing prices in several years.

Confirmation in next month’s report could signal higher home prices later this year.

© 2017 Newsmax Finance. All rights reserved.

1Like our page
2Share
StreetTalk
The Census Bureau tracks new-home sales and reports a variety of data every month. Headline numbers are the number of homes sold, the average sales price, and the supply of unsold homes on the market. Sales in April were up 7.3 percent compared to last month, but down 23.1...
houses,home,sales,supply,us,economy
292
2011-03-24
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved