New Home Sales Increase for Fourth Straight Month

Sales of newly constructed single-family homes rose for the fourth month in a row in July, increasing almost 10 percent to a seasonally adjusted annual rate of 433,000 units.

It's the highest sales rate the Commerce Department has reported for new single-family homes since last September, before the credit market meltdown, when a rate of 436,000 units was reported. The July figures still represent a decline of 13.6 percent from the July 2008 level, however.

The data in the monthly Commerce Department reports is quite volatile, and the department cautions that three or four months of data are required to reliably establish a trend. However, with four consecutive months of increasing sales, following a low of 329,000 units in January, it would appear that sales are clearly trending upward.

In another promising sign, the inventory of unsold homes also dropped, to 271,000 units from 280,000. More significantly, that represented a decline to a 7.5 month supply from 8.5 months in June; a six-month supply is generally considered to represent a balance between supply and demand. The inventory of unsold homes has been declining fairly steadily since January, when it hit a high of 12.4 months.

Ironically, the average time individual homes spent on the market before selling has continued to rise even as the supply of unsold homes has declined. The average new home sold in July spent 12.4 months on the market before selling, up from 11.8 months in July. The average time on the market before selling for new homes has risen or held steady every month since July 2008, when it stood at eight months.

Median sales prices continued to decline, however, as first-time homebuyers continued to make up a larger-than- normal share of the market, attracted in part by an $8,000 tax credit. First-time buyers tend to focus on the lower end of the market, so when first-time purchases increase, median sales prices tend to decline.

Median sales price for July was $210,100, down slightly from the previous month, but generally in line with where prices have been for most of 2009. That represents an 11.5 percent decline from the $237,300 median price reported in July 2008.