EmailNew housing starts fell for the second consecutive month, declining from 315,000 in May to 312,000 in June. The Briefing.com consensus expected new home sales to increase slightly to 320,000.
The underlying fundamentals in the economy are still not attractive for home buying. This includes increasing unemployment, declining incomes, and tight credit conditions.
Homebuilders have been doing a good job keeping inventories at a manageable level. For the past few years, the number of homes currently under construction has steadily declined. That has led to the number of homes available for sale to fall to 164,000, the lowest number of units available since record keeping began in 1963 and 408,000 below the peak in 2006.
Even though sales have been trending lower over the past couple of months, the lack of new construction has caused inventories to fall to 6.3 months of supply, the lowest level since the homebuyer tax credit artificially inflated sales levels in April 2010. Excluding the tax credit, inventories are at their lowest point since June 2006.
Still, the average supply of new homes before the housing bubble in the 1990s was 6 months, including an average of 4.9 months from 1995 - 2000. Even with the unprecedented drop in inventories over the past few months, the relatively low inventory levels are still elevated compared to normal conditions. Thus, builders may continue to pull back on new construction and let inventories fall even further unless sales rebound unexpectedly in the near future.
