Sales of new homes increased sharply to an annual pace of 433,000 up more than nine percent for the second straight month, following positive revisions to previous data.  Inventory and Prices both declined.  Sales increased 9.6 percent  in July to the fastest pace since the financial crisis intensified  last fall.  Sales are now up more than 30 percent from their low set in January. 

Inventory levels continued to declind and are now at their lowest level since the early 1990′s.  Coupled with rising sales, the months’ supply of homes has declined sharply to just 7.5 months.  We expect further declines going forward.

The homebuyer tax credit is likely providing a lift in the new home market, just as in the existing home market, where the NAR (National Association of Realtors) noted last week that the credit had “significant impact”.  With the expiration of the credit on the horizon, we would not be surprised by some retracement in sales, but do not expect to set new lows. 

INVENTORY OF NEW HOMES FOR SALE.  July 2009 at 271,000.  If you go back into my blog of July 29,2008, I commented on the existing inventory of new homes.  In July 2006 it was at an all time high of 572,000 homes.  Last year it was at 426,000 and I quoted an economist that stated “at the rate of attrition we are currently at, we should be at historical levels by mid-2009″ (historically, this country has about 300,000 new homes on inventory).  We have not only achieved that, we are below the historical average.  To some degree, that is why you are starting to see the rise from the ashes of new home sales.

Alexandria, even though an island of prosperity at times, is still a microcosm of the national and global landscape.  You will see that these statistics have an impact on our market and economic stature as well.  That’s the reason that I watch them.

Source:  US Department of Commerce and Wells Fargo Securities, LLC