New Home sales flat in August, homebuyer tax credit weighs on demand

New home sales were unchanged at 288,000 units in August (the level of sales was lower than forecasts). The supply of new homes fell 1.4% to 206,000 in August, the lowest since July 1968. However, the supply of new homes in relation to sales remained elevated at 8.6 months in August.

BOTTOM LINE

As with existing home sales, new home sales continued to be depressed by the borrowing forward of sales caused by the homebuyer tax credit. It may take a few months before we can judge the underlying level of home sales and while we expect some rebound from current levels, given labor market conditions, existing home supply, and foreclosures, we expect the recovery in new home sales to be a very muted one for some time.

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