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September 26, 2017 | New Home Sales Weakening as Builder Speculation Increases: Home Builders In Trouble?

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

This morning, the Census Bureau reported New home sales are down again.

Diving a bit deeper into the report there is clear evidence of builder speculation just as home sales and prices weaken.

New Home Sales by Price

New Home Sales by Price – Percent Distribution

Price Discounts Coming Up

New Home Sales Details

  • Seasonally adjusted, home builders are speculating on 284,000 homes without as sales contract.
  • One year ago, builders had 241,000 homes in various stages of construction without a sales contract.
  • Median sales prices fell 6.2% in the current period and is up only 0.4% from a year ago.
  • Year-over-year new home sales are down 1.2%.

Amusing Headline 

On August 15, CNBC’s Diana Olick reported Homebuilder Sentiment Soars on Strong Sales

  • U.S. homebuilders bounced back from a recent funk, as current sales and sales expectations leaped forward.
  • The National Association of Home Builders/Wells Fargo Housing Market Index now stands at 68. Anything above 50 is considered positive sentiment.
  • Builders say they are seeing rising demand from buyers, who seem ready to pay a premium for new construction.

Home Builders In Trouble?

It might be a bit early to make that call, but in general, builders build until they go bust, turning most bullish at the top.

At a minimum, builders will have to offer steep discounts to unload inventory.

Mike “Mish” Shedlock

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September 26th, 2017

Posted In: Mish Talk

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