The mainstream media headlines blared a 6% gain in new home sales in April to a seasonally adjusted annual rate of 433,000. That beat the consensus expectation of 415,000. The seasonally adjusted, annualized headline number is fictitious. April’s actual new home sales totaled 41,000.
Housing Starts Decline – Click to enlarge
April is normally the busiest month for new home sales. As always, it posted an increase versus March but the increase was just 2,000 units.That was the same as last April’s monthly bump. However, this April’s sales were 4.7% less than April 2013′s. Sales momentum is barely improved from March’s 4.9% annual decline and is worse than February, which dropped 2.8% year over year. That was in a month supposedly adversely impacted by the weather.
The most recent 3 months combined totaled 4.1% less than the same 3 months last year. This is a sharp slowdown for the prior 3 months which had had a solid gain.
Contrary to the headline indication, there’s no sign of a second wind to the housing “non recoveryâ€. Sales in April were just 11,000 units more than the 30 year record low of 30,000 units set in April 2011. They remain  75,000 units less than the April record high of 116,000 set in 2005.
Making matters worse, single family housing starts increased in April. Falling sales are worsening the supply demand gap that began to form in March when starts rose and sales fell. If sales don’t increase sharply, the gap can only be closed by a reduction in housing starts. These are the type of conditions that normally lead to a slowdown in housing development activity. Housing could become a drag on the economy in the months ahead.
