New home sales data for the month of September was much more positive than expected, as sales rose and inventories shrunk at a record pace. New home sales gained 2.7% for the month, up to a seasonally adjusted annual rate of 464,000. The report was above expectations, as economists were expecting a number closer to 460,000. Sales of new homes are now down 33% compared with September 2007.

The inventory of unsold homes fell a record 7.3% to 394,000, the 17th consecutive monthly decline and the lowest level in four years. But because the sales pace has been so weak, the month supply has stayed high. At the September sales pace, the inventory represented 10.4 months’ supply of homes, down from 10.9 months in August.

Via MarketWatch:

At 394,000, the inventory represents 10.4 months’ worth of sales, about double the normal inventory. It’s taking more than 9 months after completion for the typical new home to sell, a sign that builders have much more work to do to bring supply down to match demand.

In the past year, the number of homes for sale that were under construction has plunged by 35%.

Prices for new homes also fell, as the median sales price came in at $218,400. It is down 9.1% in the past year and at it’s lowest level in four years.

Regionally, sales plunged 21% in the Northeast to 22,000 annualized, the lowest pace recorded in 35 years. Sales rose 23% in the West to 108,000 annualized after plunging 30% in August. Sales dropped 6% in the Midwest to a 17-year low of 65,000 and rose 0.7% in the South to 269,000.

In all of 2007, 776,000 new homes were sold, down from 1.05 million in 2006.

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