The census bureau reported 667,000 new home sales in September at a seasonally adjusted annualized rate (SAAR) compared to an Econoday consensus estimate of 555,000.
Volatility tied to low sample sizes is what the new home sales report is known for, proving its reputation again as September surged 18.9 percent to a 667,000 annualized rate. This is the largest percentage gain in nearly 28 years and is the highest level of the economic cycle, since October 2007. The revision to August is surprisingly slight, now at 561,000 vs an initial 560,000.
If hurricanes affected the South in September, then they apparently lifted sales which rose 26 percent in the month to a 405,000 rate. Sales in the three other regions also rose, led by a 33 percent gain in the Northeast to a 48,000 rate and an 11 percent increase in the Midwest to 73,000. Sales in the West rose 2.9 percent to 141,000.
The surge in sales makes inventories look even tighter. The number of new homes on the market did hold unchanged in the month at 279,000 yet, relative to sales, supply fell 1 full month to 5.0 months.
Underscoring the strength of the data is strength in prices as sellers were not giving discounts. The median rose a very steep 5.2 percent in the month to $319,700. And prices may have further to run as the year-on-year gain, at only 1.6 percent, is far below the yearly sales rate of 17.0 percent.
The volatility that this report is subject to makes today's results feel uneasy. The 3-month average tells a less dramatic story, at 603,000 which is roughly where the trend line has been much of the year. But September's surge is still something to take notice of, and unless it's revised away or simply proves a one-month wonder, the new home market may be accelerating sharply into year end.
Analysts had predicted new home sales number would retreat again in September, on the heels of a 9.4 percent loss in August. Whoops!
September's results from the U.S. Census Bureau and the Department of Housing and Urban Development were far beyond anyone's expectations. Sales of newly constructed single-family homes were at a seasonally adjusted annual rate of 667,000 units, an 18.9 percent month-over-month increase and 17 percent above the September 2016 pace. The earlier estimate for August was revised upward, but only by 1,000 units to 561,000.
On a non-adjusted basis there were 52,000 new homes sold during the month compared to 45,000 in August. Despite two hurricanes hitting the region in late August and early September, more than half of the sales, 31,000, were in the South.
In July of 1963 New home sales were 665,000. Today we topped that number. Congratulations.
Nonetheless, I am more than a bit skeptical of these numbers. Heck, even Econoday is skeptical over the numbers.
Mike "Mish" Shedlock