August 26, 2008
On the heels of a report showing a slight rise in sales of existing homes, the U.S. Commerce Department reports new home sales posted a similar gain in July. And while the inventory of existing homes increased last month, the number of unsold new homes dropped 5.2 percent, suggesting supplies are drying up.
No one is predicting a housing recovery is underway, but some economists appear hopeful the market is reaching a bottom. David Resler, an economist with Nomura Securities International, told Bloomberg News that the market will see activity at low levels for a while longer, but says a bottom may be near.
The Commerce Department report showed new home sales increased 2.4 percent to a 515,000 annual pace. But the report's headline number was inventory, which showed the number of unsold homes on the market fell 5.2 percent, the most since November 1963.
The median price of a new home decreased 6.3 percent to $230,700, from $246,200 a year earlier.
Cautious optimism was also reflected in today's report on second quarter home prices, released by S&P;/Case-Schiller. Though the report showed continued broad-based declines in single-family home prices, the report's authors believe a bottom may be in view.
"While there is no national turnaround in residential real estate prices, it is possible that we are seeing some regions struggling to come back, which has resulted in some moderation in price declines at the national level" said David M. Blitzer, Chairman of the Index Committee at Standard & Poor's. "Depending on where you focus on the details of the report, you can see some different stories on where home prices are headed."
Record year-over-year declines were reported in both the 10-City and 20-City Composites in June; however, Blitzer notes they are very close to the values reported for May, meaning the rate of home price decline may be slowing. For the month, the 10-City Composite was down 0.6 percent and the 20-City Composite was down 0.5 percent.
"While still falling, these are far less than the 2-2.5 percent monthly drops seen earlier in 2008," he said.
If conditions are improving, consumers may be picking up on that trend. In its monthly report, the Conference Board says consumer confidence in August is up significantly over July. However, the improvement may have little to do with the housing market and more to do with the price of gas.
Consumers' outlook brightened during a month when oil prices plunged from July's record highs, providing some relief at the gas pump.
