Wednesday, December 27, 2006

Median New Home Price Has Surged $26,200 in 3 Months

- New Home Sales for November rose to 1047K versus estimates of 1018K and an upwardly revised 1013K in October.
BOTTOM LINE: Sales of new homes in the US rose more than forecast last month as lower mortgage rates and more incentives helped builders reduce inventory, Bloomberg reported. The 3.4% gain followed an increase the prior month that was larger than expected. The median price of a new home rose 5.8% in November to $251,700. This was the biggest year-over-year price gain since June. Moreover, the median new home price is back to it second-highest level on record at $251,700. The only other time it has been higher was April of this year at $257,000. The supply of new homes at the current sales rate fell to 6.3 months’ worth in November, the lowest since May, versus 6.7 months’ worth in October. The ratio has fallen from a high of 7.2 months in July. New home sales soared 22.5% in the Northeast, 22.4% in the Mid-west and 19% in the West. Sales fell 9.3% in the South. I continue to believe the housing market is stabilizing at relatively high levels. With prices approaching record highs and inventories falling rapidly, the case for a housing "hard landing" looks increasingly difficult to make. The 10-year yield is rising 4 basis points on the news and the homebuilding index is outperforming, rising 1.2%.

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