This morning, the Census Bureau reported New home sales are down again.

Diving a bit deeper into the report there is clear evidence of builder speculation just as home sales and prices weaken.

New Home Sales by Price

New Home Sales by Price – Percent Distribution

Price Discounts Coming Up

New Home Sales Details

  • Seasonally adjusted, home builders are speculating on 284,000 homes without as sales contract.
  • One year ago, builders had 241,000 homes in various stages of construction without a sales contract.
  • Median sales prices fell 6.2% in the current period and is up only 0.4% from a year ago.
  • Year-over-year new home sales are down 1.2%.

Amusing Headline 

On August 15, CNBC’s Diana Olick reported Homebuilder Sentiment Soars on Strong Sales

  • U.S. homebuilders bounced back from a recent funk, as current sales and sales expectations leaped forward.
  • The National Association of Home Builders/Wells Fargo Housing Market Index now stands at 68. Anything above 50 is considered positive sentiment.
  • Builders say they are seeing rising demand from buyers, who seem ready to pay a premium for new construction.

Home Builders In Trouble?

It might be a bit early to make that call, but in general, builders build until they go bust, turning most bullish at the top.

At a minimum, builders will have to offer steep discounts to unload inventory.

Mike “Mish” Shedlock