The Econoday consensus was 610,000 in a range of 590,000 to 622,000. Nonetheless, Econoday was happy about a number of things.
Overstating weakness, July’s headline for new home sales fell to a far lower-than-expected annualized rate of 571,000. This is offset, however, by upward revisions totaling 33,000 in the two prior months which now stand at 630,000 and 618,000. This series, where sample sizes are low, is often volatile month-to-month with the 3-month average, still over 600,000 and just off expansion highs, telling the more reliable story.
The best news in July’s report is an increase in supply, up 4,000 to 276,000 new homes on the market. Relative to sales, supply moves from 5.2 months to 5.8 months which is nearly at the 6 month mark which is widely considered to be balanced for new homes.
Prices are showing increasing traction, up 0.7 percent in the month to a median $313,700. This is up 6.3 percent year-on-year which is roughly in line with prices of existing homes.
The strength in pricing is good news for residential investment but not for first-time buyers who are being priced out of the new home market. The downdraft in July’s data aside, new homes are probably still a positive for the housing sector which has been trending higher in fits and starts all year. Watch tomorrow for existing home sales where strength is the expectation.
Worst Annual Pace in 3 Years For New Home Sales
New home sales in July were expected to remain steady after scoring a slight gain in June, instead they plunged to a rate even lower than those a year earlier. Three of the four geographic regions shared in the decline,
Sales of newly constructed homes in July are estimated at a seasonally adjusted annual rate of 571,000 units. This is down 9.4 percent from June and 8.9 percent from the estimate for July 2016. The bad news was mitigated a bit as the U.S. Census Bureau and the Department of Housing and Urban Development revised their earlier June estimate to 630,000 units from their original estimate of 610,000.
On a historic basis and especially on a population-adjusted basis, new home sales are pathetic. They would have been pathetic even if the Econoday consensus estimate was reached.
New Home Sales Percent Change From Year Ago
Year-over-year, new home sales are down almost 9 percent. Since 2012, such declines have been taken back. The result is the slow uptrend red line in the first chart.
As always, Econoday cheered “price traction”. The Econoday Keynesian parrot is always happy when people get less for their money.
It’s far beyond the parrot’s comprehension, but one of the reasons new home sales are pathetic because few can afford them.
Moreover, the attitudes of millennials towards homes, material things, and family formation have changed. Attitude shifts have not hit bottom yet, and may not for another generation or longer.
Mike “Mish” Shedlock