New Home Sales Continue Parade Of Bad Housing Data

Sales of new homes plunged a record 33% in May to a record-low after the expiration of the federal tax credit subsidy for home buyers expired. Sales were a seasonally adjusted annualized rate of 300,000, the lowest since record-keeping began in 1963.

Now we know how the housing market will do without a government prop. My understanding is that the subsidy is still effective through the end of this month. However, given yesterday’s existing home sales data confirm the fall off in activity, we are probably seeing the effect of the end of the subsidy.

EconomicPic Data shows us the numbers in graphical form:

The data is no better when the trend is smoothed (6-month averaging). At least the first chart did show some incipient signs of lift. But the smoothed data show a flatlining.

While much of this year-on-year fall is just the effect of removing the government prop, the past data are also suspect. Sales in March and April were revised lower with April’s sales annualized numbers at 446,000 versus the originally-reported 504,000. One month does not a trend make. Nevertheless, these are not good numbers.