New Home Sales a Bit Short of Expectations, May Revised Lower
May was revised lower to 605,000 units from the initial reported 610,000 units.
New home sales are steady near the best levels of the expansion, at a 610,000 annualized rate in June. The 3-month average is 597,000 which is, however, noticeably below the first-quarter cycle peak of 617,000. This is a negative for second-quarter residential investment in Friday’s GDP report.
But the upshot of today’s report is mostly positive. Sales are very strong in the West which is a key region for new homes. Sales in the region rose 12.5 percent in the month to a 180,000 pace and are up 33 percent year-on-year. But sales in the South, another key region and the largest one, fell in June, down 6.1 percent to a 323,000 pace. June sales were up in the Midwest, at a 66,000 rate, and flat in the Northeast at 41,000.
Sales got a lift from lower prices in the month, down 4.2 percent for the median to a still imposing $310,800. Year-on-year, the median is down 3.4 percent and looks low compared to the 9.1 percent gain for on-year sales.
Supply offers limited good news, rising but only slightly at a 1.1 percent monthly gain to 272,000 units. Relative to sales, supply is steady at 5.4 months vs 5.3 and 5.5 in the prior two months.
New Home Sales Trend
New Home Sales Since 1963
The trend starting in 2011 is clear. Every acceleration or reversal quickly gives way to the trend line.
The numbers from 1965 add a bit of needed perspective. Population-adjusted, new home sales are very anemic.
Affordability makes a purchase out of the question for most millennials. More importantly, attitudes towards ownership have changed.
Mike “Mish” Shedlock