New home sales

June New Home sales, a measure of contract signings, totaled 384k annualized, 32k more than expected and up from a revised 346k in May. The federal $8,000 tax credit for 1st time buyers and the $10,000 California tax credit for new homes are certainly helping (sales in the West rose 23% m/o/m). Months supply fell to 8.8 from 10.2, the lowest since Oct ’07 and is the other bright spot within the data. Sales also rose in the Northeast and Midwest while falling in the South. The median home price fell 12% y/o/y and 5.8% sequentially as builders lower prices to compete with foreclosures. New home sales make up about 15% of the overall housing sector so the existing home sales data is more relevant in terms of trends and inventory but today’s data is still a move in the right direction as we bounce along the bottom. A sustainable improvement not induced by tax credits will still take time as the home ownership rate heads lower.

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