New home sales rise, but grim news lurks
Sales pace of new homes in July grew 2.4%, due to a large downward revision in sales from the previous month. Unadjusted monthly sales fall to 13-year low.
NEW YORK (CNNMoney.com) -- The government offered more discouraging news about the housing sector on Tuesday, reporting that new home sales rose slightly in July only after revising the previous month's number sharply lower.
Sales for July came in at a seasonally adjusted annual rate of 515,000, up 2.4% from 503,000 in the previous month, the Census Bureau reported. Last month, Census had put the June figure at 530,000.
The change marks the fourth of the past five reports that Census has slashed the previous month's number. The trend worries economists who say a hoped-for stabilization of the housing market remains elusive.
"It's concerning because the pattern of revisions from the Census Bureau has been systematically downward instead of random as you'd expect," said David Seiders, chief economist for the National Association of Home Builders. "Chances are we'll see some downward revision when they put out the August numbers."
The July reading on the battered housing market was below the consensus forecast of 525,000, according to economists surveyed by Briefing.com.
"The uptick is still good news, but we'll see if it holds," said Seiders. "The market could really use a boost."
Even though sales for the month unexpectedly rose month to month, sales fell 35.3% from July 2007, when new home sales were on an annual pace of 796,000.
The rise in new home sales is also deceptive because of seasonal adjustments. On a non-seasonally adjusted basis, the report showed only 43,000 new homes were sold in July, which marks the lowest level for that measure since December 1994.
Sales rose as home prices continued to plummet. The median price of a new home sold last month was $230,700, up just 0.2% from $230,100 in June.
July's median price was down 6.3% from $246,200 a year earlier, the Census Bureau reported.
This decline in median price probably doesn't accurately capture the weakness in prices for new homes, as about three out of four builders have reported having to pay buyers' closing costs or offer other incentives such as expensive features for free in order to maintain sales.
Prices have been driven down by the glut of new homes on the market.
The report showed 169,000 completed new homes available at the end of the month, bringing total inventory - including new homes under construction and not yet started - to 416,000, equal to 10.1-month supply.
Builders were finding that it typically takes 8.5 months to sell a completed home in the current market, according to the report.
"Inventory of existing home sales has definitely been affected by foreclosure sales, and the new home market has been afflicted by that negatively," said Seiders. "But in recent quarters, we've seen sales volume exceeding housing starts for sale, so that will run inventory down if that continues."
The report is the latest sign of trouble in the overall housing market.
On Monday, the National Realtors Association reported existing home sales rose more than expected in July, but prices continued to fall and inventory increased to a record high. Earlier Tuesday, the S&P/Case-Shiller national home price index showed U.S. home prices fell a record 15.4% in the second quarter compared with last year.
And according to a new report from the Mortgage Asset Research Institute released Tuesday, the number of fraudulent loans issued during the first three months of 2008 skyrocketed 42% compared with the same period in 2007.