Holy Snikes! New Home Sales Fall 40.3%

I had to do a double-take when i saw that number:

Sales of new one-family houses in May 2008 were at a seasonally adjusted annual rate of 512,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.5 percent (±13.7%)* below the revised April rate of 525,000 and is 40.3 percent (±6.9%) below the May 2007 estimate of 857,000.  –Census Bureau

A few data points worth pulling out of this months release:

• May New Home Sales totaled 512k, in line with expectations;
• 512k is the 2nd lowest reading in 17 years (501,000 at an annual pace in March ’08);
• Builders made progress reducing supply: New homes for sale hit a 3 year low of

• Completed homes for sale fell the fourth straight month;
• Length of time completed home sat for sale rose to 8.5 months; That’s double  what it took in 2006;
• Months supply rose to 10.9 from 10.7 (the high was 11.4 in March);
• Median price fell to 5.7% y/o/y to $231k, average price fell to $311k;

• Sales of previously owned homes — about 85% of the housing market — scheduled to be released tomorrow at 10 a.m.;

The May sales of new U.S. houses fell 2.5% — less than Estimated average relative standard errors of ±13.7%, and are therefore statistically not significant. The Year-over-year data, at 40.3%, far exceeds the ±6.9% margin of error.

Rex Nutting adds the following caveats:

The figures likely overstate the number of sales, because they don’t
account for canceled sales. The report is based on contracts signed,
not sales closed. Inventories are likely understated because of

Government statisticians have low confidence in the monthly report, which is subject to large revisions and large sampling and other statistical errors. In most months, the government isn’t sure whether sales rose or fell. The standard error in May, for instance, was plus or minus 13.7%. Read the full government report.

The government says it can take up to five months to establish a new trend in sales. Over the past five months, sales have been on a 541,000 annual pace, 37% slower than a year earlier. In all of 2007, 776,000 new homes were sold, down from 1.05 million in 2006.

Good stuff.

New Home Sales, May 2008
Chart courtesy of Barron’s Econoday



New Res Sales_may_08.pdf
Census HUD, June 25, 2008

New-Home Sales in the U.S. Fell 2.5% to 512,000 Pace in May
Courtney Schlisserman
Bloomberg, June 25 2008

New-home sales fall 2.5% in May to 512,000 pace
Builders slash prices and further reduce inventories of unsold homes
By Rex Nutting, MarketWatch
Last update: 10:00 a.m. EDT June 25, 2008

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What's been said:

Discussions found on the web:
  1. Alaskan Pete commented on Jun 25

    Here in SoCal, median home price to household income is still around 6!!

    Even here near LALA Land, where prices are always higher than the avg market, the normal ratio is around 4. In sane housing markets, it would be around 2.5.

    We’ve got a long way yet to fall.

  2. larster commented on Jun 25

    I Zillowed my house in the Chi suburbs that I sold in 2001 and it was up only $35,000 from the sale price of $448,000. Last time I looked (over a year ago) it was aroung $600. While Zillow has it’s flaws, it is essentially an apple to apples, assumming their methodology remins the same.

  3. Mark McGlothlin commented on Jun 25

    Nice look at some of the “other data” that the media always seems to overlook. We’re a real estate market research team, and we find that constriction of inventory and prices falling to more rational affordability measures seem to be at least two of the key changes that must occur in markets to begin to stabilize the picture. We also agree the sales data for existing homes will be more revealing. Nice post.

  4. Bob A commented on Jun 25

    Why did ‘Hoovertown’ just pop into my head?

    Will we soon be hearing about ‘Bushtown’?

    Did I just coin a phrase?

  5. Our man in Helsinki commented on Jun 25

    Best possible proof of the irrationality of the stock market! Terrible number … and at the same time the stocks are soaring. And why? The investors are waiting for Mr. Bernanke’s wise words later today. But what can he say? The investors are really trusting more someone else’s words than their own sense.

  6. TheGuru commented on Jun 25


    You are not being fair! The number is this low because those bastards at Fannie and Freddie won’t give out jumbo loans as they were prodded to by Congress. Freddie and Fannie seem hellbent on trying to repair (or at least limit the damage to) their balances sheets. Who the hell do they think they are?

  7. Estragon commented on Jun 25

    Mark M – “We also agree the sales data for existing homes will be more revealing.”

    IMHO, existing home sales may be more revealing of current demand, but not so much about marginal supply. Even though most sales are of existing homes, only new construction adds to supply.

    Even if household formation is being deferred, causing very low absorption of marginal supply, the social and demographic factors behind formation trends are ongoing. At some point the households likely will be formed, and pent up demand for housing will appear. If new housing sales continue low, it follows that the demand will be met in the rental market.

    Given that rental markets drive the housing component of CPI, it wouldn’t surprise me to see persistent upward pressure even if energy and food prices drop a lot.

  8. DL commented on Jun 25

    If these guys would stop building so many houses, they wouldn’t have to worry about selling them.

  9. Tim Walker commented on Jun 25

    US housing – No stabilisation

    The Case/Shiller house price index has rightly become the most important economic data release of the month. There can be no recovery in the US banking system, no let up on the downward pressure on consumer spending and no increase in confidence until the housing market stabilises. The April index registered a 15.3% YoY fall in house prices across 20 cities in the US. This was down from 14.4% registered in March and slightly better than analysts’ expectations of a 16% YoY drop. But analysts’ expectations for this indicator don’t matter – all that matters is that house prices continue to go down and therefore all the negatives mentioned above continue to apply. In particular, the models used by ratings agencies and investment banks that churned out default projections based on ever rising prices that led to triple-A ratings for junk bonds will have to be adjusted. As they adjust, the pain in the financial system will roll on as assets are written down or written off. Robert Toll, one of the leading builders in the housing boom, on Monday said that the slump will last another 2-3 years (over a year ago he declared that t was nearing a turnaround). We fear he is right. The US property market is not stabilising and, as a result, the slow motion recession is set to lurch downwards.

  10. JB commented on Jun 25

    With sales this low, there’s no way the industry can support even 70% of the realtors, appraisers, mortgage brokers, etc. that were around in 2006.

    What are they all doing now? What industry is hiring them?

  11. MarkTX commented on Jun 25

    “What are they all doing now? What industry is hiring them?”

    Go to work for the fDIC??????

    And as usual, the FED blows more smoke….

    re: FED rates unchanged

  12. Julie Haviv commented on Jun 25

    Mortgage applications drop to 6-1/2-year low

    U.S. mortgage applications fell for a second consecutive week, hitting their lowest level in nearly 6-1/2 years despite a sharp drop in interest rates, an industry group said on Wednesday.

    The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ended June 20, which includes both purchase and refinance loans, dropped 9.3 percent to 461.3 — the lowest level since the week ended December 28, 2001.

    The report offers additional evidence of a U.S. housing market that is suffering one of the worst downturns in its history. Significantly tighter lending standards and an unwieldy supply of homes for sale are some of the factors preventing the U.S. housing market from rebounding out of its two-year-long slump.

    In a separate report on Wednesday, the government said U.S. sales of newly built single-family homes dropped 2.5 percent in May and more than 40 percent from a year ago.

    The median sale price fell 5.7 percent in May from a year earlier to $231,000, the U.S. Commerce Department said.

    The frenzy of foreclosures hitting the market is aggravating matters adding to the unsold home inventory and depressing home prices nationwide, analysts say.

    The jump in foreclosure sales explains part of the sharp drop in home prices since foreclosures typically sell at about a 20-percent discount to the market, according to Michelle Meyer, an economist at Lehman Brothers in New York.

    “Foreclosures and falling home prices are mutually reinforcing,” she said in commentary published on Tuesday before the mortgage and sales reports were issued.

    Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.39 percent, down 0.18 percentage point from the previous week.

  13. Chris D. commented on Jun 25

    However, on a good note, I did get some encouraging information from the IRS. My Bush Administration blood money–I mean “economic stimulus”–will soon be on its way!

    “Your payment of $1,500.00 is scheduled to be issued on July 4, 2008. If you do not receive your check by August 1, 2008, please contact us again. We are unable to take any action until then.”

    You know you’re a true Economic Patriot when they schedule your check for July 4th…but won’t the USPS be closed that day?

    Track your blood money here:

  14. MarkTX commented on Jun 25

    Thanks Chis D. for the link (I am forwarding that link to my MOM, so she will quit asking me a lot of questions).

  15. Susan commented on Jun 25

    What’s a snike?

  16. SuckMyDick commented on Jun 25

    How long, and how often do we have to tell these people that things are fucked! Get it…things are fucked. AKA JoeSixPack

  17. Chris D. commented on Jun 25

    My pleasure, MarkTX. My mom’s not bugging me about the rebates, but don’t get her started on the digital TV transition!

  18. grumpyoldvet commented on Jun 25

    HOLY SNIKE?????????????? What is that….George Carlin said it simpler…HOLY SHIT…..

  19. Todd commented on Jun 25

    And yet Jerry Bowyer was screaming at Joe Battipaglia today on Kudlow ”tell me what economic weakness!!!!”

    Denial is not just a river in Egypt in RepublicanMouthpieceLand.

  20. 42 commented on Jun 25

    define “snikes” plz thx. we like snikes!

    srsly: housing bottom? maybe in 2012. I’ll keep saving my pennies, er, euros, er, renminbi then I can be one of those “investors” who “snap up” properties that the media were so hyperventilate-y about not so long ago.

  21. Robert commented on Jun 26

    I’m pretty sure there’s an “H.” Holy Shnikes! Not Snikes.

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