Sales of new single-family homes in America fell by 1.7 percent in July to a seasonally adjusted annual rate of 627K units, according to new data from the U.S. Census Bureau. That was worse than forecast but the June figure was revised higher. Most of the weakness was due to a 52 percent plunge in the Northeast region of the country, a larger than anticipated pullback following the prior month’s 33 percent jump. Clearly new home sales data can be quite volatile, but the longer-term trend remains positive, which is encouraging since this leading economic indicator tends to head sharply lower ahead of a recession. Moreover, sales are up 12.8 percent on an annual basis, and the number of properties sold in which construction had not yet started lifted in July to the highest level since last November. The latter suggests that homebuilders will stay busy in the second half of 2018. Headwinds remain, though, such as rising home values, and the median selling price increased to $328,700 in July even as total supply lifted to the highest level of 2018.
Speaking of housing inflation, the Federal Housing Finance Agency’s (FHFA’s) national home price index (HPI) rose by 0.2 percent in June (lagged release), the smallest monthly gain since March and half the increase expected. Despite the recent slowdown, the HPI has still risen for 77 months in a row, and home prices have increased in all 50 states and the District of Columbia between the second quarter of 2018 and Q2 2018, according to the FHFA. The top five regions in terms of annual price appreciation are Nevada (17.0 percent), Idaho (13.0 percent), D.C. (11.8 percent), Utah (11.3 percent), and Washington (11.0 percent). Some economists also like to compare the HPI to the owners' equivalent rent section of the monthly consumer price index (CPI) report from the U.S. Bureau of Labor Statistics to help spot price bubbles. As the chart below shows, home values have increased significantly in recent years but remain below the extremes seen prior to the last recession.
Sources: Econoday, U.S. Census Bureau, U.S. FHFA , ZH, Bloomberg, FRBSL
Post author: Charles Couch