New Home Sales Rose For Fifth Consecutive Month In August

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While the Commerce Department released a report Friday morning showing that new home sales increased for the fifth consecutive month in August, the modest growth came compared to a notably downwardly revised rate for the previous month.

The report showed that new home sales rose 0.7 percent to an annual rate of 429,000 in August from a revised 426,000 in July. Economists had expected sales to increase by 1.6 percent to 440,000 from the 433,000 originally reported for the previous month.

With the continued increase, new home sales rose to their highest level since reaching an annual rate of 436,000 in September 2008. Nonetheless, sales in August remained down 3.4 percent compared to the same month a year ago.

The modest increase in new home sales was largely due to a notable increase in sales in the West, where new home sales jumped 12.1 percent.

Meanwhile, new home sales in the South were unchanged, and sales in the Northeast and the Midwest fell by 16.3 percent and 5.8 percent, respectively.

The recent increases in new home sales have been due in large part to an $8,000 tax credit for first-time homebuyers, although the credit is due to expire on November 30th.

Peter Boockvar, equity strategist for Miller Tabak, noted, "Buyers who sign a contract to buy a home today will likely not be able to close by November 30th and will not be able to capture the credit."

"It's possible that the August housing sales data began to show the hangover from the initial tax credit sales boost in the second quarter," he added.

The report also showed that the median sales price of new houses sold in August was $195,200, down 11.7 percent compared to the same month a year ago.

Additionally, the Commerce Department said that the number of new houses for sale at the end of August fell to 262,000 from 270,000 at the end of July. This represents a supply of 7.3 months at the current sales rate, down from 7.6 months of supply in the previous month.

The National Association of Realtors released a separate report on Thursday showing that existing home sales unexpectedly fell in August after increasing in each of the four previous months.

The report showed that existing home sales fell 2.7 percent to an annual rate of 5.10 million units in August from a 5.24 million unit rate in July. The decrease came as a surprise to economists, who had expected existing home sales to increase to a 5.35 million unit rate.

Despite the monthly decrease, NAR noted that existing home sales remain up 3.4 percent compared to a 4.93 million unit rate in August of 2008.

Lawrence Yun, NAR chief economist, said, "Home sales retrenched from a very strong improvement in July but continue to be much higher than before the stimulus."

"Some of the give-back in closed sales appears to result from rising numbers of contracts entering the system, with some fallouts and a backlog contributing to a longer closing process, but the decline demonstrates we can't take a housing rebound for granted," Yun added.

While the Commerce Department released a report Friday morning showing that new home sales increased for the fifth consecutive month in August, the modest growth came compared to a notably downwardly revised rate for the previous month. The report showed that new home sales rose 0.7 percent to an annual rate of 429,000 in August from a revised 426,000 in July. Economists had expected sales to increase by 1.6 percent to 440,000 from the 433,000 originally reported for the previous month. (Market News Provided by RTTNews)