My friend Brian Wesbury, one of the best economists around (in my opinion) does not see the same dark clouds around real estate that I do despite the terrible August new home sales figures and growing anecdotal evidence of inventory buildup and longer time-to-sell.

I recommend looking at the "Print Version with Graphics" of Brian's comment about the new home sales numbers, which you can get to at the link a couple of lines down....

Claymore Data Watch

By Brian S. Wesbury, Chief Investment Strategist
and Bill Mulvihill, Senior Economist

Print Version with Graphs Click Here

August New Home Sales

· New home sales plummeted 9.9% in August to 1.237 million units at an annual rate from a record 1.373 million in July. While this was a significant decline, new home sales are still 6.2% higher than a year ago.

· The median price of a new home rose a non-seasonally adjusted 2.5% in August but is up only 1.0% in the past 12 months. This is significantly less than the 15.4% YOY increase in the median price of an existing home.

· At the current sales pace, the months supply of new homes on the market rose to 4.7 months - the highest level since June 2000. However, during the 1990s, the inventory of new homes on the market averaged 5.6 months, suggesting that by historical standards, supply remains tight.

Implications: New home sales sank 9.9% in August to 1.237 million units from July's record level of 1.373 million units. Declines were broad based, with the Northeast region being the worst performer, falling 22.0%. As a result of weak sales, the supply on new homes on the market rose to a 5-year high of 4.7 months. This will spark fears that buyers have lost their appetite for new homes and that the "bubble" is about to "burst." Yet, month-to-month data are always volatile and the longer term data paints a different picture. New home sales averaged 1.28 million units in the first eight months of 2005-a 6.5% increase from the record annual average in 2004. In fact, the three most prominent measures of the housing market-housing starts, existing home sales, and new home sales-are all on pace for a 5th consecutive year of gains. Moreover, the sharp increase in supply is likely temporary and, even so, remains well below the average of 5.6 months in the 1990s. Demographic trends, wealth and a strong economy continue to support housing activity. While "froth" might exist in certain local markets, we believe that a recession-creating housing collapse is highly unlikely.