New-Home Sales Rise 2.4 Percent In July

Sales of newly built single-family homes rose 2.4 percent to a seasonally adjusted annual rate of 515,000 units in July, the Commerce Department reported recently. The report also indicated continuing contraction in the number of new-homes for sale as builders keep a tight rein on inventories to help restore better balance between market supply and demand.

“With 15 consecutive months of reductions in the number of new homes for sale, builders are clearly doing a good job of chipping away at their inventories,” noted Sandy Dunn, president of the National Association of Home Builders (NAHB) and a home builder from Point Pleasant, W.Va. “Now that the government has also done its part by passing a much-needed housing stimulus package, we are looking forward to positive effects on new-home sales in the near future.”

“While the improvement in new-home sales in July is definitely a favorable development, it comes on the heels of two consecutive months of significant downward revisions to sales numbers for May and June, so we have to keep the latest report in perspective,” said NAHB Chief Economist David Seiders.

"Nevertheless, we are cautiously optimistic that home sales are approaching a bottom, and that the newly enacted first-time home buyer tax credit (which went into effect as part of the housing stimulus bill on July 30) will help stimulate sales and provide crucial support for a market turnaround.”

Commerce’s report indicated that the inventory of new homes for sale declined for a fifteenth consecutive month in July to 416,000 units, the lowest number since April of 2007. This reflects a 10.1 months’ supply at the current sales pace, down from 10.7 in June.

On a regional basis, where estimates are subject to large month-to-month variations, sales activity was mixed in July. The Northeast posted a nearly 39 percent gain, the West posted a 9.9 percent gain, the Midwest posted an 8.2 percent decline and the South posted a 2.5 percent decline. Every region registered declines in the number of new homes for sale in July.