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New Home Sales: Strong Gains To End Summer

September 25, 2019

Bottom Line: New homes sales were sharply stronger than expected in August, and July data were revised higher. Sales over the last three months have averaged 703K and are 4.0% above the 6 month average of 676K, suggesting a modest turn higher in the trend. The months supply dropped moderately as sales rose and inventories fell. New home prices continued to climb relative to their year ago levels with both average and median prices jumping in August. Overall, these data suggest housing demand remains moderate with tight supply conditions. Separately, more recent data from mortgage purchase applications suggest September activity remained steady to slightly higher, even despite a modest increase in mortgage rates.

New Home Sales ROSE by 7.1% to 713k, after the prior month was revised higher to 666k. This compared with market expectations for an increase to 659k, from the unrevised July level of 635k.

Sales are now 18.0% ABOVE their year ago level, -- but they are still 48.7% BELOW their July 2005 peak.

The Inventory of Homes Available for Sale FELL by 1.2% to 326k. Inventories are now 2.5% ABOVE their year ago level but still 43.0% BELOW their July 2006 peak level.

Combined with the increase in sales, the Months' Supply dropped to 5.5 months from 5.9 months. This is modestly BELOW a normal level of 6.0 months and well BELOW its peak of 12.2 in January 2009.

Home Prices ROSE with median prices 2.2% ABOVE their year ago level and with average prices 6.1% ABOVE their year ago level.

Article by Contingent Macro Advisors