New home sales unexpectedly rose 9.6% in June month-over-month (m/m) to an annual rate of 433,000 units, much better than the 1.6% gain expected by economists, and May and April sales were revised higher, up 9.1% and 4.9% respectively. The median price of a new home fell 12.0% year-over-year (y/y), to $210,100. Inventory of new homes for sale continued to fall in June, to 271,000 units, the fewest since March 1993 according to Bloomberg, and combined with the jump in the pace of sales during the month, it represented 7.5 months of supply at the current sales rate, down from the peak of 12 months, but still elevated from the seven months of supply that is usually consistent with a stabilization in prices.
New home sales have struggled to compete with the discounts afforded by foreclosures of existing homes, and the market share of new homes has been running at 7% in 2009, off the high of 16% during the bubble. In response, homebuilders significantly cut back on new housing starts, allowing inventory levels of new homes to fall, and have been adjusting their models to fit changing consumer spending behaviors and credit conditions that have a bias toward smaller and more affordable homes. New single-family housing starts have been on the rise since February to meet demand driven by the $8,000 tax incentive, which ends November 30. Improving data on the housing market has been bullish for investor sentiment, but traders are uneasy about the sustainability of increases after the stimulus is removed.
[from Schwab Alerts]
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