Implications: New home sales declined slightly in July, remaining in the very low range they have been in since May 2010. This number is based on contracts signed in July, at the height of the debt ceiling debate and (unwarranted) fears of a government default. New home sales face a number of strong headwinds. Credit conditions remain tight (even as mortgage rates decline) and many existing homes are selling at steep discounts, including foreclosed properties and short sales. However, the inventory of new homes for sale fell to the lowest level on record yet again in July. This is exactly what must happen to speed up the eventual housing recovery. The median price of a new home is up 4.7% versus a year ago while average prices are up 8.0%. In other news this morning, the Richmond Fed index, a measure of manufacturing in the mid-Atlantic, fell to -10 in August from -5 in July. Regional surveys of manufacturing activity have performed poorly so far in August, but this probably reflects the nature of survey data, which can sometimes reflect sentiment rather than actual levels of business activity. Chain-store sales have decelerated modestly so far in August (when they usually slow anyhow) but are still running solidly above year-ago levels, 3.6% according to Redbook, 3% according to the International Council of Shopping Centers.
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