New-Home Sales in the U.S. are Approaching a Bottom Aug 21, 2008

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While new-home sales have exceeded starts for-sale in recent times, new-home sales volume has continued to trail downward — albeit at a slower pace than last year, according to the National Association of Home Builders (NAHB).

NAHB’s proprietary survey of 30 large builders shows further erosion of gross and net sales in July (seasonally adjusted), and its broad-based single-family Housing Market Index (HMI) was at a record low of 16 in both July and August.

On the bright side, NAHB says the sales expectations component of the HMI moved upward in August, presumably reflecting expectations of support from the US$7,500 first-time home buyer tax credit that was created by the Housing and Economic Recovery Act of 2008.

Furthermore, NAHB says, surveys of consumer sentiment (University of Michigan) show that rising proportions of consumers say home buying conditions have been improving — primarily because of downward price adjustments in many areas.

NAHB’s forecast shows a bottom for new-home sales before the end of this year followed by a 10% gain in 2009 (year-over-year).

This sales pattern, if achieved, it says, will produce substantial improvement on the inventory front and lead to an upturn in housing starts by the second quarter of next year — assuming adequate supplies of credit for residential development and construction.

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