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New Home Sales Slow After Fast Start To 2012

July 26, 2012

New Home Supply 2010-2012

The number of newly-built homes sold slipped 8 percent in June from the month prior, says the U.S. Census Bureau in its latest New Home Sales report. The June data shows 350,000 homes sold nationwide on a seasonally-adjusted, annualized basis.

The home sale tally fell short of Wall Street expectations but the Census Bureau revised higher its previously-released results for March, April and May by a collective 33,000 units. This left the June New Home Sales report as the weakest of the last five months, yet still stronger than the 21 months preceding February.

In other words, despite retreating from May, the June New Home Sales data was still quite strong. As compared to June of last year, sales of newly-built homes are higher by 15% and the national inventory of new homes for sale is down to 144,000 units.

This marks a 13 percent inventory reduction in just twelve months.

At the current sales pace nationwide, the complete stock of new homes would “sell out” in 4.9 months, a noteworthy data point because analysts believe that a 6.0-month supply of homes marks a market in balance. Home supplies of below 6.0 months suggest a “seller’s market” where sellers have pricing power and excess leverage in negotiations. 

Home supplies have been south of 6.0 months since October 2011. This is the same month that marked a shift with other housing data points, too, including Existing Home Sales and the Home Price Index.

Since October 2011, the average new home sale price is higher by 6% nationwide, a trend that should continue through the end of 2012 and into 2013 — especially with mortgage rates at new all-time lows and home affordability at all-time highs. As more buyers enter the market amid limited supply, prices are expected to rise.

If you’re a home buyer in search of new construction, therefore, the best new home “deals” you may find may be the ones you find today.

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