New Home Sales Jump 11%

Business Week just reported a significant rise in home sales for June. We aren't out of the woods yet, but this is also an indication for smart investors to get in now!

Anyone just hear a thud? That might be the sound of the housing slump bottoming out.

The Commerce Dept. reported on July 27 that sales of new one-family houses in June were at a seasonally adjusted rate of 384,000, an 11% increase over the revised May rate of 346,000. That beat analyst estimates—but was still 21.3% below the year-earlier estimate of 488,000.

Meanwhile, the median sales price of new houses sold in June was $206,200, down 12% from $234,300 a year earlier and down nearly 6% from $219,000 in May. The seasonally adjusted estimate of new houses for sale at the end of June was 281,000, representing an 8.8-month supply at the current sales rate, down from 10.2 months.

"The sales figures reinforce the view that the housing sector troughed in Q1, as this sales gauge has risen substantially from the cyclical-trough of [329,000] in January," Action Economics commented. Action Economics had forecast June's sales rate at 355,000.

But while housing might be finding a floor, it's less than a penthouse view. Morgan Stanley (MS) analyst David Greenlaw noted that "much of the sales activity was concentrated at the lower end of the market. Second, sales contracts that were signed in June may have been tied to the lows in mortgage rates that were recorded in April and May."

And there's still an excess of inventory, analysts said.

"Unfortunately, until that figure gets down to around 6 months worth of supply, the downward pressure on prices will remain," Paul Ashworth, senior U.S. economist for Capital Economics, said in research note. "The median price of a new home fell by 12% over the year to June. In short, activity is stabilising, albeit at very low levels, but prices will continue to fall for the foreseeable future."

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