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New Home Sales: Further Strength as Trends Turn Higher

July 24, 2020

Bottom Line: Furthering the notion that housing is leading the economic recovery following the shutdowns for the novel coronavirus, new home sales rose sharply in June for the second straight month. Three-month average sales are now higher than the 12-month average, suggesting a turn higher in the trend, in the Northeast and Midwest. The South and the West have lagged a bit, though, as the virus resurged in many parts of those regions. Still, the strength, even in those hard-hit regions, was notable. New home sales are based on contract signings rather than closings like existing home sales. Thus, this report bodes well for future existing home sales activity. Finally, supply was lower as construction slowed in most regions. And amid the more robust demand, prices were swiftly higher. Overall, this report confirms housing as a leading sector of the recovery.

New Home Sales ROSE by 13.8% to 776k, after the prior month was revised lower to 580k. This compared with market expectations for a decline to 640k, from the unrevised May level of 676k.

Sales are now 6.9% ABOVE their year-ago level, -- but they are still 44.1% BELOW their July 2005 peak.

The Inventory of Homes Available for Sale FELL by 1.3% to 307k. Inventories are now 7.0% BELOW their year-ago level but still 46.3% BELOW their July 2006 peak level.

Combined with the increase in sales, the Months' Supply dropped to 4.7 months from 5.5 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 5.6% ABOVE their year-ago level and with average prices 6.3% ABOVE their year-ago level.

Article by Contingent Macro Advisors