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New home sales may be stable, but still too low
April new home sales were 323,000 units at seasonally adjusted annual rates, better then expected, up 7.3% from March’s 301,000 pace and 17.8% above the low set in May, 2010. First chart shows how sales collapsed in 2007 through 2008, bottoming out 78% below their level in December 2005. Sales of existing homes also dropped but by only 44% in the same time period. Despite their larger collapse, new home sales appear less volatile in recent months than existing home sales. One small hint of improving new home markets is in the ready supply of new homes shown on the second chart – months supply has been dropping over the last year as sales stabilized.
Reports and gossip point to foreclosures and strict credit requirements for mortgages as two big problems for home buyers in most markets and nothing in today’s new homes sales numbers can erase these worries. For the moment we should take the recent stability in the sales rate as a positive step to eventual recovery.