Hangover and not the movie

In a hangover from the tax credit induced binge in the July thru Oct period, Nov New Home Sales, which measure contract signings which were likely done when the extension of the tax credit was uncertain and thus believed to be unattainable at the time, totaled 355k annualized, 83k below forecasts and down from 400k in Oct (revised from 430k). It’s at the lowest level since April. Months supply rose to 7.9 from 7.2, the most since June. The South and West saw the biggest declines which are the two areas that have the biggest competition from foreclosures. The Northeast fell a touch while the Midwest saw a gain. Home prices fell 1.9% y/o/y but rose 3.7% sequentially. Bottom line, with the artificial lift from the tax credit (where half of buyers are 1st time for existing homes and many were able to take advantage), its become very tough in gauging true demand. Come summer, after the tax credit expires and the Fed is done buying MBS, we’ll know.

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