New Home Sales are Trending Up, But Existing Home Sales are Stalled
- New Home Sales ticked up by 0.8 percent in June, to a 610,000 unit annual rate.
- Existing Home Sales decreased by 1.8 percent in June to a 5,520,000 unit annual rate.
- The Case-Shiller U.S. National Home Price Index was up 5.6 percent in May over the previous year.
New home sales ticked up by 0.8 percent in June to a 610,000 unit annual rate. This is still below the March peak of 638,000, but the trend looks positive. The month’s supply of new houses on the market also inched up, to 5.4 months’ worth. According to the Census Bureau, the median sales price of a new house in June was $310,800, about 3.4 percent lower over the previous 12 months. The drop in prices for new homes is due to builders increasingly focusing on downmarket segments.
Existing home sales eased by 1.8 percent in June, to a 5,520,000 unit annual rate. After trending up through 2015, existing home sales were range bound in 2016, near the 5.4 million unit mark. They appeared to gain some altitude in late 2016/early 2017, but over the past several months they once again look range bound near a 5.5 million unit pace. This is not a bad number. It approximates the pace of existing home sales before the big upswing in the mid-2000’s which was followed by the crash. However, it also shows that there is less momentum in housing than expected. It is fair to say that the single-family housing market is not leading the economy in this expansion, but following it, grudgingly. The inventory of available existing houses for sale inched up to 4.3 months’ worth in June, still showing a tight market. The median sales price of an existing house was up by 6.5 percent in June over the previous 12 months, according to the National Association of Realtors.
The Case-Shiller U.S. National Home Price Index gained 0.2 percent in May, after seasonal adjustment, and was up 5.6 percent over the previous 12 months. Looking at the 20-city statistics reveals that 6 out of 20 cities saw slightly lower prices in May. Most of the 20 cities are showing solid year-over-year price gains. Chicago trails the list, up only 3.3 percent over the last year. Seattle is leading the pack, up 13.3 percent.
The Federal Reserve will release a monetary policy statement today at 1pm central time at the conclusion of the two-day Federal Open Market Committee meeting. Policy makers are expected to leave interest rates unchanged. Fed watchers will be looking for clues about a possible September announcement for the beginning of balance sheet reduction in October. They will also be looking for signs that the Fed may want to lower expectations from their previous dot plot which was consistent with four rate hikes between now and the end of 2018. We expect the next interest rate hike to come this December.
Market Reaction: U.S. equity markets opened with gains. The 10-year Treasury bond yield is down to 2.33 percent. NYMEX crude oil is up to $48.44/barrel. Natural gas futures are down to $2.89/mmbtu.
For a PDF version of this Comerica Economic Alert click here: New_Home_Sales_072617.