Capturing the post home buying tax credit world, May New Home Sales, a measure of contract signings of new homes, was a disaster at 300k annualized, 27% below estimates and April, which included the credit, was revised down by 58k. The May sales level of 300k is the lowest since at least 1963. The drop sent months supply to 8.5 from 5.8 in April, the highest since June ’09. The area with the biggest foreclosure rate and thus greatest competition to the home builders, the West, saw sales fall 53% m/o/m. The median home price fell 9.6% y/o/y and 1% sequentially. Bottom line, we knew there would be a large post tax credit drop in sales but the degree is obviously big. The question though for the industry is not this data but what happens after the hangover runs its course. Either way, the distortion of steroid shots into the marketplace has only made long term planning and thus efficiently allocated capital that much more difficult to coordinate.
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