New Home Sales Hit Record Low, Builder Confidence Suffers

Sales of new single family homes fell to 276,000 units in July, on a seasonally adjusted annual basis. That's the lowest sales total on record, going back to 1963.

Sales in the west region came in at 44,000 units in July, on a seasonally adjusted annual basis. That's also a record low, going back to 1973. Sales had been improving until the end of April, when the home buyer tax credit expired.

Note: Sales of new homes are recorded when contracts are signed. For existing homes, however, sales are recorded when transactions close. That's why existing home sales fell only modestly in May (following the April 30 expiration of the tax credit), while new home sales fell abruptly.

Not surprisingly, builder confidence is suffering. After hitting a record low of 8 in January 2009, the NAHB Housing Market Index had risen as high as 22 in May 2010. The index has fallen back sharply since then, however, to it's current level of 13.

Evidently, builders' hopes were buoyed by tax-credit-induced sales. Did they not see the end of the tax credit coming?