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New Home Sales: Sharp Acceleration in August

September 24, 2020

Bottom Line: Housing continued to lead the economic recovery in August as new home sales jumped for the third straight month, at a pace 43% above year-ago levels. The trend has accelerated sharply after a brief contraction during the shutdowns for the novel coronavirus. These data continue to 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 3.3 months based on the recent sales tally as inventories fell again. Prices were moderately lower on the month, suggesting the composition of sales shifted towards lower-priced homes (likely both those in lower-priced regions and smaller, starter-homes). Overall, this report confirms housing as a leading sector of the recovery.

New Home Sales ROSE by 4.8% to 1011k, after the prior month was revised higher to 965k. This compared with market expectations for a decline to 640k, from the unrevised July level of 901k.

Sales are now 43.2% ABOVE their year-ago level, -- but they are still 27.2% BELOW their July 2005 peak.

The Inventory of Homes Available for Sale FELL by 3.1% to 282k. Inventories are now 13.2% BELOW their year ago level but still 50.7% BELOW their July 2006 peak level.

Combined with the increase in sales, the Months' Supply dropped to 3.3 months from 3.6 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 FELL with median prices 4.3% BELOW their year-ago level and with average prices 6.0% BELOW their year-ago level.

Article by Contingent Macro Advisors