 | New Single-Family Home Sales Increased 5.7% in August |
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| Posted Under: Data Watch • Home Sales • Housing |
Implications: New residential home sales surprised to the upside in August, surging to a seven-year high and easily beating consensus expectations. Sales increased 5.7% in August to a 552,000 annual rate, the highest level since February 2008. Sales are up 21.6% in the past year. Housing starts, which are a good predictor of home sales, have followed this trend as well. But new home sales have been running even higher than what would be expected with the pace of housing starts. The underlying details of today's report also showed strength. The months' supply of homes for sale fell to 4.7 months in August from 4.9 in July, with the decline entirely due to the faster sales pace, as inventories rose by 1,000 units. Note, however, that the increase in inventories was not due to finished homes sitting unsold, but instead to homes where the builder has yet to begin construction. In fact, the inventory of completed homes for sale declined in August. This paired with the increased pace of sales shows that builders still have plenty of room to increase both construction and inventories. Having made these points, don't forget that new home sales are still depressed relative to history. We think there are a few reasons for this. First, a larger share of the population is renting. Second, buyers have shifted slightly from single-family homes, which are counted in the new home sales data, to multi-family homes (think condos in cities), which are not counted in this report. Third, although we may be starting to see a thaw, financing is still more difficult than it has been in the past. The trend is what matters, though, and the trend in sales continues higher. In other recent housing news, the FHFA index, which measures prices for homes financed with conforming mortgages, increased 0.6% in July and is up 5.8% from a year ago. Price gains like these underscore the incentive for builders to build more homes.
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