New Home Sales Up Big

New home sales rose 9.6% to a rate of 433K in July, compared to a consensus forecast of 390K, and a previous reading of 384K units.  The rate of sales increased in July to its highest level since September 2008.  The inventory of new homes fell to 7.5 months from 8.5 a month prior.  The month’s supply of new homes is at its lowest levels since April 2007.  The median home price fell 0.1% in the month to US$210,100.

New home sales is yet another housing indicator demonstrating continued improvement indicating that housing may have bottomed and started on its measured recovery. Increasing foreclosures and delinquencies across all types of mortgages stemming from a weak labor market are still weighing heavily on the sector, but for now at least, have been offset by attractive mortgage rates, tax incentives, and relatively low home prices.  The first time home buyer incentive program is set to expire on December 1st.  What this means is qualified home buyers would need to start closing on a property by mid-October to take advantage of the program, without any government extensions.  Presently, it is hard to judge the total effect the expiration of this program could have on home sales, but it would almost certainly cause some downward pressure.