New Home Sales Down for Fourth Month in a Row

CNNMoney reports that new home sales were down again in August, the fourth month in a row for declining sales on the new home side. This certainly doesn’t give builders any incentive to do any speculative home building. New homes sold at a seasonally adjusted annualized rate of 295,000 in August, a 2.3% drop from the revised rate for July of 302,000.

Bad as it may sound, it was better than expected. Economists had forecast a rate of only 293,000 for August, so the improvement over the forecast was 0.6%. Sales, weak as they were in numbers for August, were still 6.1% above the same period a year ago. The annualized rate then was only 278,000.

The trend in recent months has really be almost completely flat, with sales hovering around an annual rate of 300,000 homes. That’s down more than 80% from the boom period peak. Some analysts were actually relieved by the August number, as they had feared more of an effect from Hurricane Irene and the downgrade of U.S. debt.

Interest rates at record lows isn’t contributing to any appreciable buying pressure. It’s still very difficult for even those with good credit scores to get a mortgage, and consumers simply don’t see owning a home as a positive thing right now. For prospective buyers, there were 162,000 new homes available at the end of August, representing a 6.6 month supply.

For investors, these statistics coupled with the rise in prices of existing homes for four months straight should generate enthusiasm. Even those who want to buy can’t get a mortgage, and supply is shrinking while rental demand is growing.