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Economy in Brief

New Home Sales Drop But Prices Rise – Go Figure
by Robert Brusca March 24, 2010

If there is such a thing as a classic signal for a weather effect this is it: sales fall but Yr/Yr prices rise. Housing prices are not seasonally adjusted. They do exhibit some pretty pronounced seasonal patterns, however. Yr/Yr percentage changes purge seasonality from the data but make it harder to detect short term changes.

In February we have a 2.2% month-to-month drop in new home sales led by a 20% drop in the wintry NE and a minus 18% result in the snow-covered Midwest, compared to a -4.6% drop in the South and a 20.8% gain in the West. The winter profile of losses/gains makes sense. The turn up in prices shows median price gains Yr/Yr for the first time since October of last year and only the third Yr/Yr rise for median prices in 27 months. Average prices are up for three-months running; the last three-month rise in prices ended in June of 2007.

Despite some sharp improvement in economic conditions the huge fiscal help offered by the government has reached its limits. Attempts to pull back and inject fiscal prudence are not being well-accepted in France.

On balance this report really has the feel of a report disrupted by weather in a market that is getting back in shape. The existing home sales report was not as clean in producing its weather effects since the lags are longer. Homebuilders count a sale as consummated when the contract is signed. The NAR calls a deal a deal when it closes, meaning that monies are exchanged which means that we must wait out the financing process which these days is running three months in many places.

I find this report on new home sales very encouraging since, once prices are no longer falling, the real impediment to buying is gone. And home affordability is still very high.

New Single Family Home Sales
 As of:
Momentum: Annualized Rates Of Change Prices
Total N.E MidW South West Median Average
Month-to-month percent change
Feb.10 -2.2% -20.0% -18.0% -4.6% 20.8% 6.1% 5.1%
Jan.10 -8.7% -10.3% 2.0% -12.6% -6.1% -5.2% -3.8%
Dec.09 -4.7% 30.0% -31.0% -5.4% 7.9% 0.2% 1.8%
Annualized Rates
  Total N.E MidW South West Median Average
3-Mo -59.7% -26.7% -169.0% -84.3% 89.5% 3.1% 12.0%
6-Mo -49.0% -44.4% -53.6% -59.6% -27.8% 13.4% 20.2%
1-Yr -13.0% 0.0% -18.0% -29.5% 34.8% 5.2% 9.3%
Cumulative prices change since same mo of SAAR
  2008 2007 2006 2005 2004 5-yr% 10-Yr%
Avg 9.3% -6.2% -12.1% -8.2% -2.2% -0.5% 3.6%
Median 5.2% -10.1% -12.1% -12.1% -7.1% -1.5% 3.1%
  Yr Yr price changes by 12-mo period     
Avg 9.3% -15.5% -5.9% 3.9% 6.0%
Median 5.2% -15.3% -2.0% 0.0% 5.0% Median Average
Feb.10 Max Drop in Current Prices Since 2000 -16.0% -14.2%
&Drop is calculated from higest point in period
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