Home Sales Continue to Trail Downward From Unsustainable Highs
Home sales still are trending downward from the record levels posted during the third quarter of 2005.
Sales of new single-family homes (based on signed contracts) fell by 6.6% in June to a level that’s 40% below its 2005 peak. Sales of existing single-family homes (based on closings) fell by 3.5% in June to a level that’s 20% below its 2005 peak. “Pending” sales of existing homes (based on contracts signed) were up by 5% in June but down on a 3-month moving average basis.
Indeed, the second quarter as a whole was down by nearly 7% from the first quarter average, pointing toward further declines in closings in the third quarter.
The Commerce Department’s series on new-home sales (signed contracts) does not recognize cancelled contracts. There is no estimate of net sales (contracts signed less contracts cancelled), resales of homes taken back by builders due to cancellations are not recorded in the sales series, and there is no estimate of new-home sales closed.
NAHB’s proprietary survey of 32 large builders (accounting for more than one-fourth of all for-sale housing in the U.S.) overcomes all of these conceptual deficiencies. The June readings (seasonally adjusted by NAHB) show gross sales 31% below the July 2005 peak, net sales 43% below their peak in July 2005, and closings 38% below their recent peak in March 2006.
Although NAHB’s large-builder data system showed some tentative signs of stabilization as the second quarter drew to a close, public statements by many of the public companies suggest that there’s still downward momentum in the single-family market.
Indeed, NAHB’s broad-based single-family Housing Market Index points in that direction. The HMI fell to a cyclical low of 24 in July, down from the cyclical peak of 72 in June 2005 and the lowest level since January 1991 — near the bottom of the 1990 to 1991 economic recession.
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