New Home Sales: Trend Shift is Clear

August 23, 2018
Bottom Line: Continuing a string of weaker housing data, new home sales in July were slower, below expectations for an increase. Sales over the last three months have averaged 640K and are 1.3% below the 6 month average of 648K. The months supply rose modestly as sales fell, inventories rose, and new home prices continued to climb relative to their year ago levels. Affordability appears to be a major driver as both new and existing home prices continue to climb with mortgage rates remaining 75bps above 2017 levels and 125+bps above levels seen in late summer 2016. New home data is always volatile, and there was a sharp decline in the Northeast in July that looks anomalous -- but that said, in light of other housing data, there appears to be a clear loss in the upward momentum across most housing indicators, including new home sales. New Home Sales FELL by 1.7% to 627k, after the prior month was revised higher to 638k. This compared with market expectations for an increase to 645k, from the unrevised June level of 631k. Sales are now 12.8% ABOVE their year ago level, -- but they are still 54.9% BELOW their July 2005 peak. The Inventory of Homes Available for Sale ROSE by 2.0% to 309k. Inventories are now 12.0% ABOVE their year ago level but still 46.0% BELOW their July 2006 peak level. Combined with the decline in sales, the Months' Supply increased to 5.9 months from 5.7 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 1.8% ABOVE their year ago level and with average prices 5.9% ABOVE their year ago level.