New home sales: Barely breathing

There is little reason to get excited about the worst June in 47 years

Published July 26, 2010 9:48PM (EDT)

Reading the business press, you might be inclined to think that the numbers on new home sales released Monday morning were reason for optimism:

Bloomberg: "Sales of U.S. New Houses Rise More Than Forecast in Sign Slump Nearing End"

Sales of U.S. new homes rose in June more than forecast following an unprecedented collapse the prior month, a signal the worst of the slump triggered by the end of a government tax credit is over.

Wall Street Journal:

New-home buying surged in June after a May plunge caused by the end of a government tax credit, according to a better-than-expected report on the ailing housing sector...

While the sales level was the second lowest on record since 1963, the unexpectedly strong increase offered a glimmer of hope about a sector stuck in the doldrums.

Really? A glimmer of hope? Calculated Risk, as usual, punctures the illusion.

Ignore all the month to previous month comparisons. May was revised down sharply and that makes the increase look significant. Here is the bottom line: this was the worst June for new home sales on record.

Thirty thousand new homes were sold in June 2010. The data series goes back to 1963. The previous worst June, 1982 -- the depths of the Reagan recession -- registered 32,000. In the meantime, the U.S. population has grown by about 78 million. To categorize the new data as an "unexpectedly strong increase" is simply ridiculous.

Of course, an upturn has to start somewhere, and perhaps the housing sector finally hit bottom in May. But just last week we learned that existing home sales, housing starts, and builders' confidence all registered declines. This week's new home sales numbers, according to Calculated Risk, add up to "a very weak report." Let's wait a few months before spotting any more glimmers. Right now, the U.S. housing market is struggling to get off the death bed, and failing.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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