New Home Sales, July 2012

TRADEX GLOBAL INTERNAL COMMENTARY

What a difference six years makes!  In July 2006 we had 570k new houses on the market; now in July 2012 we have 144k.  No wonder "new sales" dropped 9%, no one can find one!  With record low interest rates we would like to see a bigger number.  I think this trend may be the "new norm" for most industries: make less, carry less inventory, have higher gross margins, etc. (you get the drift).  This is not good for employment or the economy, but maybe it is a way to stay in business.  If anyone cares, I would make it mandatory for a certain amount of homes (the teardowns) to be leveled and property to be sold at a discount if a new home is built on it (or a tax credit).  This might have a positive effect on neighborhoods and could create construction jobs!  Well, it’s July and maybe it is just a summer dream of mine to help all Americans... Back to business - the number was bad, but we do not put too much emphasis on it.  Keep nimble - Michael Beattie

EXTERNAL RESEARCH COMMENTARY

Sales of new U.S. homes unexpectedly dropped in June from a two-year high, a sign the market is being held back by a lack of inventory after builders curtailed projects. Purchases fell 8.4 percent to a 350,000 annual rate, the weakest since January, the Commerce Department reported today in Washington. The median estimate in a Bloomberg News survey of 74 economists was 372,000. The decline was led by a record plunge in the Northeast, where the number of properties available last month was the fewest for any June. “A dearth of construction has led to a very significant inventory shortage,” said Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York, who forecast sales would drop to a 345,000 rate, the lowest of those surveyed. “If you want to buy a newly built home, good luck finding one.” Record-low mortgage rates and stabilizing home prices have spurred buyer traffic, even as unemployment and strict lending standards remain obstacles for the industry that precipitated the last recession. Among companies betting that construction will pick up is Caterpillar Inc. (CAT), which today raised its full- year earnings forecast on improving sales of excavators, scrapers and dozers as builders replace aging equipment. Stocks dropped following the housing data and as Apple Inc. paced a decline among technology shares. The Standard & Poor’s 500 Index fell 0.2 percent to 1,336.14 at 12:04 p.m. in New York. The S&P Supercomposite Homebuilding Index decreased 2.2 percent.

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