Downward Revision Aids New Home Sales

Sales of new homes in the U.S. rose unexpectedly during September, as builders aggressively cut prices and buyers looked for bargains ahead of the latest round of credit crunching towards the end of last month. Or did they? New-home sales rose 2.7 percent to 464,000 last month, based primarily on a downwardly-revised August total of 452,000 — the second straight month of strong downward revisions to previous month’s numbers. Such revisions have helped new home sales post initial gains in both August and September. The Commerce Dept. had originally recorded August new-home sales at 515,000, before cutting that estimate to 452,000; and for June, an original reading of 530,000 was subsequently revised to 503,000 one month later. Two straight months of significant revisions underscore just how volatile the new-home sales data can be; without the revision, sales would not have posted the monthly gain largely reported today by the financial press. The revision to August’s numbers mean that the previous new home sales report — originally touted as a gain — was actually a loss. The same sort of revisioning could affect this month’s numbers, as well. See the full housing report. That said, the median price of a new home under contract decreased 9.1 percent from a year earlier to $218,400, the lowest since Sept. 2004; and sales (even the unrevised number) were down 33 percent from Sept. 2007, the report showed. “Builders are seeing the light,” Mark Zandi, chief economist at Moody’s Economy.com told Bloomberg Television in an interview Monday morning. “They are cutting prices more aggressively. They’re very nervous about all the foreclosures.” While perhaps likely to be revised downward next month, the current September new-home sales number is already the worst reading for the month since 1981. Which, in some ways, is good news — because, taken together with declining inventory and steep price discounts, it means that builders are getting serious about working through a substantial overhang of existing properties. Inventory levels fell as well, dropping 7.3 percent from a revised 425,000 in August to an estimated 394,000 at the end of Sept., according to the report by the Commerce Dept. Months of supply fell as well, despite meager demand, reaching 10.4 months from 11.4 months one month earlier. More than a few analysts — including those at Fitch Ratings — see new homes as a problematic area in the current cycle, and have said recently they expect home builders to remain under pressure through at least the middle of 2009. Part of the problem remains a substantial overhang of inventory.

Most Popular Articles

Latest Articles

2024 is not the year to cut corners on staging — here’s why 

With home prices reaching unprecedented heights and interest rates soaring, the discerning nature of today’s buyers requires all agents to employ every possible advantage. Simply put, cutting corners on staging is a risky move that risks prolonged market presence.

3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please