New Home Sales Hit 10 Month High. Inventories Declining.

The Commerce Department reported that new home sales have seen an increase to a seasonally adjusted annual rate of 433,000.  This is the largest monthly increase since February 2005.  The sales pace was also the highest it has been since last September.  

The past five months the sale of new homes has been steadily increasing.  The sales pace has remained steadily around 373,00 for the past few months. 

“The housing market is bottoming out,” Conrad DeQuadros, a senior economist at RDQ Economics in New York, told Bloomberg News. Still, “it’s not going to turn around very quickly,” he cautioned.

Another positive sign is that the inventory of homes for sale in the nation is also decreasing steadily.  The supply is the lowest it has been since April of 2007. The US Housing Market is at about a 7.5 month supply of homes.  This number is down from 8.5 months in June.  Experts consider a six month supply to be a healthy inventory.  During the housing boom of 2006, the national level was about 4 months.  The years following this boom, the supply increased to around 11 months.  There were about 271,000 new homes on the market last month. This was the lowest this number has been since March of 1993.

The stocks for many companies in the homebuilding industry were also seeing an increase in value.  Toll Bros. (TOL) reported their stock was up 73 cents.  This is a 3.3% increase, which brings the value up to $23.04 per stock. Pulte Homes( PHM) and Hovnanian Enterprises have also reported gains.

On Tuesday, the S&P/Case-Shiller home price index of 20 major U.S. cities showed prices rose 1.4% in June, the second monthly gain in a row after declines every month for three years.