What I Saw Last Week
U.S. New Home Sales in July were at a seasonally adjusted annual rate of 571,000, down 9.4% from the revised June rate of 630,0000 (from 610,000) and down 8.9% from the same period a year ago.
It is of note that, taking into account the upward revisions for the prior three months (which cumulatively added 46,000 new home sales) the July sales rate was not as big of a shortfall as it appears at first blush.
On a seasonally adjusted basis, the only region that saw a month-over-month increase in sales was the Midwest (+6.2%). The South and the West, which are the largest regions for new home sales, saw monthly declines of 4.1% and 21.3%, respectively. The Northeast was down 23.8%.
Clearly, limited inventory at lower price points and higher average selling prices continued to act as headwinds for new home sales with the median sales price up 6.3% year-over-year to $313,700 and the average sales price up 4.6% to $371,200. Although there were fewer homes sold in July versus June at prices under $399,999, that share of new homes sold in July held steady at 70%.
Based on the July sales pace, the inventory of new homes for sale stands at a 5.8-months’ supply versus 5.2 months for June.
The takeaway from the report is that new home sales growth is continuing at a frustratingly slow pace despite the tailwinds of low mortgage rates and low unemployment.
U.S. Existing Home Sales slipped 1.3% in July to a seasonally adjusted annual rate of 5.44M units. Although the July’s sales pace was 2.1% above a year ago, it still represents the lowest pace of sales seen this year.
The median existing home price for all housing types increased 6.2% to $258,300, which was the 65th straight month of year-over-year gains. The median existing single-family home price was $260,600, up 6.3% from a year ago.
The inventory of homes for sale (1.92 million) is 9.0% lower than the same period a year ago and has fallen year-over-year for 26 consecutive months. Unsold inventory is at a 4.2-month supply at the current sales pace, versus 4.8 months a year ago.
Existing home sales declined 14.5% month-over-month in the Northeast and fell 5.3% in the Midwest. Sales were up 2.2% month-over-month in the South and up 5.0% in the West.
The takeaway from the report is that neither the availability nor the affordability of homes is high, which is keeping sales activity from being all that it could otherwise be.
What to Watch for This Week
Case Shiller Index data for June to show annual price growth for the 20-City Index to match the May rate of 5.7%.
Consumer Confidence in August is likely to pull back a little on various geopolitical concerns. Look for it to come in at 120.3.
The second estimate for US GDP in the second quarter should show the economy having grown by 2.7% – up from the initial estimate of 2.6%.
Income & Spending have been a mixed bag over the past few months but I anticipate that we will see improvement in the July data. Look for incomes to have risen by 0.3% and spending 0.4% higher.
The NAR Pending Home Sales Index for July is likely to show a pullback from the 1.5% growth seen in June. My call is for 0.5% as a function of persistent low inventories.
U.S. Construction Spending dropped by 1.3% in June and the July figure should show improvement with an increase of 0.5%.
The early August estimate for Consumer Sentiment came in at 97.6 and I expect to see the final figure drop back a little to 97.1.