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New Home Sales: Sharp Increase As Trend Accelerated in July

August 25, 2020

Bottom Line: Housing led the economic recovery in July as new home sales jumped, surprising to the upside for the third straight month. The trend has accelerated sharply after a brief contraction during the shutdowns for the novel coronavirus. These data support the notion that there was a secular shift away from denser, urban living towards less dense, single-family living in the wake of the pandemic. The supply of new homes fell to just four months based on the recent sales tally as inventories fell. Prices were also stronger, now up 5-7% on the year. Overall, this report confirms housing as a leading sector of the recovery.

New Home Sales ROSE by 13.9% to 901k, after the prior month was revised lower to 580k. This compared with market expectations for a decline to 640k, from the unrevised June level of 776k.

Sales are now 36.3% ABOVE their year-ago level, -- but they are still 35.1% BELOW their July 2005 peak.

The Inventory of Homes Available for Sale FELL by 1.6% to 299k. Inventories are now 8.8% BELOW their year ago level but still 47.7% BELOW their July 2006 peak level.

Combined with the increase in sales, the Months' Supply dropped to 4.0 months from 4.6 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 7.2% ABOVE their year-ago level and with average prices 4.8% ABOVE their year-ago level.

Article by Contingent Macro Advisors