report card on the real estate

With that in mind, and knowing that the long-term market trend will ultimately reflect long-term economic data (in spite of the recent volatility), here’s the latest report card on the real estate market’s numbers from this week – sans starts and permits – good, bad, or otherwise. The chart’s at the bottom.

New Home Sales (Purple)

Yes, the number went down…. surprise surprise. The annualized rate of 300K per year is a record low, though a drop-off to some degree was to be expected. Be careful jumping to conclusions though, as the sharp drop simply balances the surge we saw in the two prior months. It will really take a couple of months from here for this data to stabilize before we can reasonably assess whether or not it was the stimulus/tax break that was propping up the new home market.

New Homes For-Sale (Black)

The good news/bad news is, the number of new homes for sale also dropped to record lows…. to 213K total. Was the new home sales figure just low because of a lack of new homes available? Doubtful, though it’s an interesting question to debate. Most likely, builders saw the writing on the wall and cooled off on the new construction before the tax credit expired. Either way, the trend remains weak, and that bodes poorly for builders.

Average Home Price (Red)

The one bright spot in last month’s mess is that the average price of a sold new home actually cranked up to $263K. That’s hardly a trend though – it’s actually right in the middle of the price range we’ve observed since mid-2008. Still, a higher price suggests a modest amount of buy-willingness and credit-availability.

Existing Home Sales (Blue)

It’s easy to forget that new homes sales only account for about 10% (on average) of the total “real estate for sale” market. Existing home sales fell last month too, but barely, to 5.6 million units – down from 5.79 million units in April. Given that this is the bulk of the real estate market, this is the argument that the bulls need to cite when making their case…..  the real estate market isn’t nearly as bad as new home sales suggests, as new homes are a tiny part of the whole picture.

Total Real Estate Inventory (Grey)

A surge in shadow inventory? You wouldn’t know it from last month’s total real estate inventory – it fell from 4.04 million units to 3.89 million. Perhaps it’s a case where all the pending phantom inventory real estate owners pulled their listing – or decided not to list in the first place – in response to the looming end to the tax credit. That’s the lesser-likely scenario though. Instead, this is apt to indicate an intention to not sell anytime soon, or to not sell at all.  Either way, if this becomes a trend, it will only help home prices and new home sales. That’s a big ‘if’ though.

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