What to Make of the 11% New Home Sales Surge

Posted by: Prashant Gopal on July 27, 2009

New home sales rocketed up 11% in June (from the previous month) to a seasonally-adjusted annual rate of 384,000 units, the Commerce Department said today. It was the largest monthly gain in nine years and it follows a series of reports that suggest the real estate market might finally be bottoming.

But while home sales increased on monthly basis, they fell 21.3% compared to June 2008. And the median home price in June was $206,000, 12% below the price a year earlier.

“An 11% month-over-month increase looks good, but it’s an 11% increase over a very small number,” said Paul Ashworth, Senior US Economist at Capital Economics in Toronto. “It’s the beginning of a new phase, but I’m not sure it’s an exciting new phase.”

Ashworth said sales might have bottomed, but the recovery will be slow.

Daniel Penrod, a senior industry analyst for the California and Nevada credit union leagues, said new home sales increase is a “very good sign.”

“Seeing an uptick is significant,” Penrod said. “The only thing that tempers it is the fact that it’s still well below last year’s same period number… But every little bit counts.”

Reader Comments

LibertyNews

July 27, 2009 6:45 PM

Talk about making a mountain out of a mole-hill.

Jay

July 27, 2009 7:14 PM

I agree with what was stated here... it seems like the media blows up everything too much on the good side of housing. If housing last year was an 8, and it falls to a 1, and then goes to a 2, that is a 50% gain... but it's still a 2. I wish they would just report the news instead of sensationalizing it.

Vic Thacker

July 27, 2009 7:22 PM

Not only is the 11% increase over a very small number and still leaves us well beehind 2008 at the same point in time, But I wonder how much of the new home increase is in high end housing as a result of the rich gettig even richer.

Ben

July 27, 2009 7:25 PM

What was the previous month's variance? And the months preceding that as well?

Jeremy

July 27, 2009 7:49 PM

This is, by definition, not significant. The major news outlets are completely ignoring this fact, but the margin of error is 13.2%, greater than the 11.0% increase.

From the commerce department's release:
* 90% confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero.

EvilRobot

July 27, 2009 9:41 PM

I just hope the people buying these homes are going to actually be living there.

The Mad Hedge Fund Trader

July 29, 2009 2:13 PM

A handful of positive data on residential real estate, and all of a sudden everyone is jubilant that the crisis is over. June new home sales popped by 11%, while the S&P Case Shiller Price Index flaunted two back to back monthly gains. Never mind that these are the same people that have been calling a bottom almost every day for the past two years, and who themselves have gone broke in the process. It’s a basic law of economics that when you drop the price, the volume goes up. We have not paid enough penance yet. We have not atoned for a generation of under saving and overconsumption. The harsh reality is that the torrent of selling is being briefly staunched by a dwindling group of first time buyers once priced out of the market, who saved their cash, and stayed away from the stock market, and are now buying two thirds off the top. Take away the fantastically generous government subsidies that expire in a few months, throw in the next wave of Option ARM reset induced foreclosures, and this market folds like a wet taco shell. I’m waiting to buy at 20th century prices, and make that a home with an indoor swimming pool and basketball court. www.madhedgefundtrader.com

Kenneth G. Smiith II

July 29, 2009 3:09 PM


Seeing an uptick is not significant; it's normal for this time of the year. We are supposed to be looking forward, but all they we're doing is looking back. Comparing to "peak" numbers that are now fantasy. www.accuriz.com

EvilRobot

July 29, 2009 3:10 PM

I just hope the people buying these homes are going to actually be living there.

Jeremy

July 29, 2009 3:11 PM

This is, by definition, not significant. The major news outlets are completely ignoring this fact, but the margin of error is 13.2%, greater than the 11.0% increase.

From the commerce department's release:
* 90% confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero.

Ben

July 29, 2009 3:12 PM

What was the previous month's variance? And the months preceding that as well?

Vic Thacker

July 29, 2009 3:14 PM

Not only is the 11% increase over a very small number and still leaves us well beehind 2008 at the same point in time, But I wonder how much of the new home increase is in high end housing as a result of the rich gettig even richer.

jay

July 31, 2009 1:25 AM

It could be the peak of the bottom buying...

Golib Kholjigitov

August 6, 2009 3:51 AM

Well again a positive sign or a glimmer of hope. Does this number mean that 11% more new homes will be built, or this is just old stock of unsold homes. People have to live somewhere, and it is a necessity rather than a luxury item. So it may not have any effect on economic recovery. On the other hand, maybe people are having hard time in finding other places to invest?

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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