U.S. new home sales increased in July
Sales of new single-family homes in the US increased by 3.6% in July to an annualized pace of 372,000 units, which was slightly higher than market expectations for an increase to 365,000. The level of sales in June was revised up to 359,000 annualized units from the initially reported 350,000; however, this was offset by a downward revision to 372,000 in May from the previously reported 382,000. Strength in new home sales in July was concentrated in the two smallest regions, with sales up 7.7% in the Midwest while sales in the Northeast surged 76.5% in the month to reverse the previous month’s 55.3% plunge. New home sales declined modestly in the South (1.6%) and West (0.9%) to provide a partial offset.
The number of new homes available for sale fell 0.7% to 142,000 from the downwardly revised 143,000 last month (initially reported as 144,000), thereby marking a new low absolute level of housing inventories for records dating back to 1963. At July’s pace of sales, it would take 4.6 months to clear this entire inventory of new homes, which would be down from the revised 4.8 months in June (previously reported as 4.9). This matches the month’s supply of new homes seen in May that had represents the lowest level since October 2005. The median sales price for new homes was $224,200, which was 2.5% below its year-ago level, and was the second consecutive such decline following four straight increases from February to May.
Today’s better than expected new homes sales report rounded out another month of data on the housing market that broadly pointed to a continued uptrend in activity, with sales, starts, permits, and homebuilder sentiment all substantially above their year-ago levels. While the improvement in housing market conditions is a welcome development for the US economy, there has only been limited progress in retracing the sharp plunge seen during the economic downturn, and activity remains at historically depressed levels. during the forecast horizon although the sector will not likely be a significant contributor to overall economic growth, and a return to pre-recession levels of activity is likely not in the cards for the foreseeable future.
David Onyett-Jeffries, Economist, RBC Economics