New home sales had been a bright spot on the economic calendar but aren't so bright right now, especially after a big downward revision. New home sales came in at a 368,000 annual rate which is a very steep 19,000 below the Econoday consensus. Now more bad news, September is revised 20,000 lower to 369,000. August is a little bit more bad news with a 2,000 downward revision to 366,000. These rates are little better than they were through the second quarter and through the most of the first quarter.
The Commerce Department doesn't note any specific reasons for the downward revision to September but it does note that Hurricane Sandy had only a minimal effect on October, hitting at month end and hitting only one area of the country. Sales in the Northeast, which in any case is by far the least active region in the report, fell 32 percent in the month. But Sandy's effect for November doesn't look to be positive given power outages through some of the Northeast in the early part of the month.
Another unfavorable sign in the report is a second straight month of price weakness, down 4.2 percent for the median to $237,700. The year-on-year rate, which had been in the positive double digits, is now plus 5.7 percent. Supply remains low in the new home market at 4.8 months at the current sales rate.
The Dow dipped to opening lows in immediate reaction to today's report, a report that raises sudden questions over the strength, and what was supposed to be the economic leadership, of the housing sector. Attention turns tomorrow to the pending home sales index which will offer an advanced indication on existing home sales which, like new home sales, have had difficulty gaining much steam.
Market Consensus before announcement
New home sales were up a very sharp 5.7 percent in September to 389,000 which was the best annual rate since the stimulus efforts of mid-2010. September's gain was convincing and was led, with a 16.8 percent jump, by the South which is far larger than all other regions combined. Supply, at 4.5 months for the lowest reading since 2005, is very tight and actually is limiting sales.