New Home Sales Jump in August, Existing Sales Cooler
- New Home Sales for August jumped by 18.0 percent, to an annual rate of 504,000.
- Existing Homes Sales dipped by 1.8 percent in August, to hit an annual rate of 5.05 million units.
The previously moribund new single-family home market had a breakout month in August, when sales jumped by 18.0 percent to reach a 504,000 unit annual sales rate. August sales were the best since May 2008. New home sales had been range bound for about two years, averaging a 427,000 unit pace from November 2012 to July 2014. One data point does not make a trend, so we will be watching new home sales closely this fall to see if the breakout has legs. If it does, that would be very good news for builders. Home construction data has also been range-bound for much of the last two years. New home sales have faced numerous headwinds despite ongoing demographic momentum. Underwriting standards are high, as are down payments. The wealth destruction endured by many baby boomers has also been a drag on the housing markets. Underwater homes in many regions remain an impediment to sales of existing homes and purchases of new homes. Also, affordability has declined from peak levels seen in the aftermath of the Great Recession. Still, the U.S. generated about 1.4 million new households in 2013, and they need to live somewhere. Most of the new households are going into the multifamily market, but eventually a good portion of the young urbanites are going to move into the single-family home market, boosting sales of existing and new single-family homes. The months’ supply of new single-family homes dipped to a relatively tight 4.8 months’ worth in August; this will motivate builders.
Sales of existing homes dipped by 1.8 percent in August, to a 5.05 million unit annual rate. The August dip was the first downturn in existing home sales since the market rebounded last April. The months’ supply of existing homes on the market now stands at 5.5 months’ worth. Sales of existing homes accelerated through 2012 and most of 2013 and then hit a wall in November 2013, dipping significantly as institutional buyers left the market. We expect the 2014 rebound in existing home sales to continue after the August dip, supported by ongoing job growth and improving consumer confidence.
Market Reaction: U.S. equity markets are up. The 10-Year Treasury bond yield is up to 2.55 percent. NYMEX crude oil is down to $91.41/barrel. Natural gas futures are up to $3.88/mmbtu.
For a PDF version of this Comerica Economic Alert click here: New Home Sales 09-24-14.