| Highlights
First there was cash for clunkers which pulled vehicle sales dramatically forward. Then there was first-round housing stimulus late last that pulled sales out of the early part of this year, followed by second-round stimulus which, yes, pulled sales out of May! And how! New home sales plunged 33 percent in May to an annual rate of 300,000, the lowest rate on the books in data going back to 1963. Making matters worse are very deep downward revisions to the stimulus-fed months of April and March, revisions totaling 108,000.
The bad news continues. Supply on the market, due to the drop in sales, surged to 8.5 months from April's 5.8 months, which is certain to slow construction and related jobs. Heavy supply will also hurt prices which fell 1.0 percent to a median $200,900. Year-on-year there's no recovery for prices, down a median 9.6 percent.
Supply may be heavy but the actual number of new homes on the market, down 1,000 in the month to an adjusted 213,000, is the lowest since 1970, more evidence of how deeply the residential construction sector has fallen. The recent run of weekly mortgage application data, the latest this morning, point to more trouble in June. Stocks are falling and demand for the safety of Treasuries is rising following today's dismal report.
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| Market Consensus Before Announcement
New home sales surged in April, up 14.8 percent to a 504,000 annual rate. New home sales are based on the contract signing date. With the deadline for closing to get special homebuyer tax credits extended to the end of June, April sales got some added lift. But to get the special credits, contracts had to be signed by the end of April. Based on purchase-only mortgage applications, which fell 27.1 percent for the month, sales are likely to drop in May. |
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