Sales of new single-family homes in America rose by 3.5 percent in August to a seasonally adjusted annual rate of 629K units, according to a new report from the U.S. Census Bureau. That was in line with expectations and the best reading since May, but the prior two months’ figures were revised much lower. Most of the sales strength in August was due to a 47.8 percent jump in the Northeast, which essentially erased July’s 46.5 percent decline. Elsewhere in the country, new home sales rose in the West (9.1 percent) and the Midwest (2.7 percent) in August but fell in the South (-1.7 percent).
Although new home sales can be quite volatile, the longer-term trend remains positive, which is encouraging since this leading economic indicator tends to head sharply lower ahead of a recession. However, the downward revisions should not be ignored and sales growth has clearly cooled this summer, something that is supported by other recent residential real estate data. Elevated prices continue to be one of the biggest headwinds for the housing market, even as supply has not only stabilized but also started to increase in several arenas. Moreover, housing inflation fell to an 11-month low in July but home prices still rose much faster than Americans’ average hourly earnings. Add to this a Federal Reserve that appears determined to continue raising interest rates and it seems unlikely the housing market’s affordability challenges will be going away anytime soon.
Sources: U.S. Census Bureau, ZH, Bloomberg, NAR, Wells Fargo, FRBSL
Post author: Charles Couch