by Calculated Risk on 4/25/2007 12:01:00 PM

For more graphs, please see my earlier post: March New Home Sales: 858 Thousand SAAR

Click on graph for larger image.

The first graph shows New Home Sales vs. Recession for the last 35 years. New Home sales were falling prior to every recession, with the exception of the business investment led recession of 2001. This should raise concerns about a possible consumer led recession in the months ahead.


The second graph compares annual New Home Sales vs. Not Seasonally Adjusted (NSA) New Home Sales through March.

At the current pace, new home sales for 2007 will probably be around 850 thousand - about the same level as the late '90s. This is significantly below the forecasts of even the most bearish economists. As an example, Fannie Mae's chief economist David Berson projected new home sales of 975K for 2007. Berson was one of the most bearish of the main stream economists, and unfortunately, his forecast is "no longer operative".

The third graph shows monthly NSA New Home sales. This provides a different prospective of the housing bust.

For existing home sales, March marks the beginning of the spring selling season. However, for New Home sales, March is typically the strongest month of the year (March was the top sales month 16 of the last 22 years). This is because New Home sales are reported when the contract is signed - and buyers are hoping to move during the summer. Existing home sales are reported at the close of escrow - so the early summer months are usually the strongest months of the year.