Both New and Existing Home Sales Improve, Bolstering Expectations for a GDP Rebound
- New Home Sales for May jumped by 18.6 percent to reach a 504,000 unit annual rate.
- Existing Home Sales for May increased by 4.9 percent, to an annual rate of 4.89 million units.
- The Conference Board’s Consumer Confidence Index increased to 85.2 in June.
- The Case-Shiller 20-City Composite Home Price Index for April was up 10.8 percent from a year ago.
Both new and existing homes sales improved in May, bolstering the case for a Q2 rebound in GDP, supported by more confident U.S. households. A key element of our view that U.S. economic activity is rebounding after a dismal Q1, is ongoing improvement in residential real estate markets, evidenced by gains in home sales, construction and prices. New home sales for May jumped well past expectations, increasing by 18.6 percent to reach a 504,000 unit annual rate. Overall market conditions for new homes are tight. The months’ supply of new homes fell to 4.5 months’ worth in May. The jump in May new home sales will likely be followed by a correction in June, but it is a number worth crowing about. It re-establishes the upward trend for new homes sales which were range-bound in 2013. Also, we have not breached the 500,000 unit new home sales mark since May 2008. Existing home sales for May increased by 4.9 percent to hit an annual rate of 4.89 million units. The months’ supply of existing homes ticked down to 5.6 after jumping to 5.7 in April. Credit availability remains a limiting factor for the housing market and so reports of easing conditions to come are good news for future home sales.
According to the April Case-Shiller 20-City Composite Home Price Index, house price gains were softer than expected. The monthly gain for the 20-City series was 0.2 percent, pushing the year-over-year gain to 10.8 percent. Four out of 20 cities, Cleveland, New York, San Diego and Washington, posted declines for the month. On a year-over-year basis, Las Vegas is the leader, up 18.8 percent. Dallas is up 9.3 percent. Detroit 15.0 percent. Los Angeles 14.0 percent. Miami 14.7 percent. Phoenix 9.8 percent. San Diego 15.3 percent. San Francisco 18.2 percent.
The Conference Board’s Consumer Confidence Index increased again in June, to 85.2 percent. Though still somewhat muted by historical standards, the June data point is the best since January 2008. The Federal Reserve Bank of Richmond reported mild growth in regional manufacturing activity in June.
Market Reaction: U.S. equity markets are up. The 10-Year Treasury bond yield is down to 2.61 percent. NYMEX crude oil is up to $106.40/barrel. Natural gas futures are up to $4.50/mmbtu.
For a PDF version of this Comerica Economic Alert click here: New Home Sales 06-24-14.