 | New Single-Family Home Sales Rose 7.9% in August to a 421,000 Annual Rate |
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| Posted Under: Data Watch • Home Sales • Housing |
Implications: A strong report on new home sales today. New home sales rose 7.9% in August and are up 12.6% from a year ago. So, in the face of higher mortgage rates and an increase in inventories of existing homes, which should be drawing some buyers away from buying new homes, the market for new homes continues to improve. As shown in the chart to the right, the 12-month moving average for new home sales is at its highest level since March 2009. The inventory of new homes has increased in 12 of the past 13 months and the gains in the past two months have been the largest over any two-month period since 2006. However, we don't see these gains as anything to worry about. The months' supply of new homes – how long it would take to sell all the new homes in inventory – declined to 5.0 in August, below the average of 5.7 over the past twenty years. As a result, as the pace of sales continues to recover, home builders can keep increasing inventories. Another way to think about it is that the construction of new homes can outpace a rising pace of sales over the next few years. In other recent housing news, the Case-Shiller index, which measures prices in the 20 largest metro areas, increased 0.6% in July. Eighteen of twenty areas had price gains for the month; the only two exceptions were Minneapolis and Cleveland. The index is up 12.4% in the past year, with recent gains led by Las Vegas, San Diego, and San Francisco. The FHFA index, which measures prices nationwide but only for homes financed by conforming mortgages, increased 1% in July and is up 8.8% from a year ago. The rapid price gains in the year ending in July were propelled by prior steep declines in inventories. Now, as builders ramp up construction and inventories start to head back up, the extra supply should take the edge off of home price gains in the year ahead. Prices will still go up, just not quite as fast.
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