New Home Sales Bounce Back in June

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales ROSE 7.0 percent in June to a seasonally adjusted annual rate (SAAR) of 646,000;
  • The May sales pace originally reported as 626,000 was REVISED DOWN to 604,000
  • The unsold inventory of new homes EDGED UP 2,000 or 0.6 percent in June to 338,000;
  • With the faster sales rate, the months’ supply of new homes for sale FELL to 6.3 in June from 6.7 in May;
  • Median price of a new home ROSE $6,900, or 2.3 percent, from May to $310,400. Year-year the median price of a new home is DOWN $100.

Trends:

  • The median price of a new home has been following an alternating pattern since last October: down in odd numbered months an up in even-numbered months;
  • The increase in the number of new homes sold in June was exaggerated by the downward revision of May sales;
  • New home sales have improved month-month in four of the six months of reporting this year and are up 14.5 percent since December;
  • In its separate report on new home completions, the Census Bureau, said last week builders had finished 870,000 single-family homes in June – 224,000 more than sales.

Data Source: Census Bureau and Department of Housing and Urban Development

Image result for new home sales

The one-point increase in builder confidence reported by the National Association of Home Builders was explained by the latest data on new home sales reported by the Census Bureau and Department of Housing and Urban Development Wednesday.

The NAHB’s Housing Market Index (HMI) hasn’t generally tracked the home sales data so the combination in June (and July’s HMI) is a pleasant surprise.

That new single-family home sales rose in June put the market for new homes on a different path than the market for existing homes. The National Association of Realtors reported Tuesday existing home sales slipped 1.7 percent in June after improving in May. The May results were revised upward.

Existing home sales were down year-year for the 16th straight month. The median price of an existing single-family home rose for the firth month in a row and the supply of existing homes on the market rose for the sixth month in a row.

The reports on new and existing home sales aren’t strictly comparable. The report on new homes tracks contracts while the report on existing home reflects closings. The NAR will report on pending home sales – contracts of sale for existing homes – next week.

Realtors have been complaining about the absence of inventory and the impact the low inventories are having on sales. With six straight months of increasing inventory however, that explanation no longer holds.

What does continue though are the headwinds potential buyers face, especially those younger buyers who are saddled with heavy layers of student debt.  Studies have shown a strong correlation between college graduation and homeownership.

That said, lenders have eased rates which could help the home sale market. The average rate for a 30-year fixed rate loan has fallen from 4.52 percent a year ago to 3.81 percent last week. That change reduces the monthly payment on a 30-year $300,000 loan by almost $124 per month.

Hear Mark Lieberman on P.O.T.U.S. (Sirius-XM 124) Friday at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

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