The six-month moving average of home sales tempers the temporary impact of the first-time home buyer program (see chart 2) but the message of "weak home sales" remains intact.  Sales of new homes have fallen 80.1% from their peak in July 2005. 

 The median price of a new single-family home fell 6.0% to $204,000 in July compared with the prior month.  On a year-to-year basis, the median price of a new single-family home has declined 4.8% (see chart 3).  The median price of new single-family home is down 22.3% from the peak in March 2005 ($262,600).  

 
The supply of unsold new homes increased to the 9.1-month mark during July from 8.0 months in June and the median duration to sell a new home moved down to 11.3 months vs. 12.3 months in June.  The large inventory of unsold homes is not supportive of firm prices in the near term.  

Sales of new and existing homes have declined to an annual rate of 3.646 million in July from a peak of 7.629 million in July 2005.  In other words, the pace of home sales has dropped 52% from its peak.  Although homes are affordable and mortgage rates are at historical lows, the soft labor market and tight underwriting standards for mortgages held back home sales.  The latest Senior Loan Officer Survey results indicate less stringent standards for mortgage loans.  But, this per se is inadequate to move sales without firms increasing payrolls.  

Orders and Shipments of Durable Goods Show a Moderating Trend

Orders of durable goods rose 0.3% in July vs. a 0.1% drop in the prior month. The 76% jump in aircraft orders and 5.3% gain in bookings of motor vehicles lifted overall orders of durable goods.  Excluding transportation, orders of durable goods fell 3.8% in July vs. 0.2% increase in the prior month.  Orders of non-defense capital goods excluding aircraft declined 8.0%, while shipments of non-defense capital goods excluding aircraft moved down 1.5%.  The important aspect to note about this report is that orders and shipments of durable goods have grown during the past year but there is a noticeable moderation in the pace of gains in July compared with the readings of the first-half of the year (see chart 6).