Sales of new homes were down last month, but not enough to work off much inventory.
The inventory of unsold single family homes (counting those that are finished or under construction only) edged down just a bit, but is still about 50 % ABOVE NORMAL! That’s 150,000 more homes than a normal inventory level. At the rate that we’re working off inventory, we’ll be rid of the excess by December 2009, just less than three years from now.
Business Strategy Implications: Those who say that we have this year to get through, and then housing will be OK, are having major denial problems. I’m an optimist at heart, but there are no signs that justify optimism for those in the new residential construction food chain.
Nouriel Roubini comments that this sales report is more important than the National Association of Realtor’s report on existing home sales. It’s not just that Roubini is trying to defend his long-standing pessimism about the economy–he’s also right. Exchanging one existing home for another is small beer compared to sales of newly built homes. New homes are part of current production, and the market for new homes impacts employment and GDP. So don’t take too much comfort in the rebounding existing home sales figure.