Implications:  New home sales fell 7.8% in May to a 626,000 annual rate, coming in below even the most pessimistic forecast of any economics group.   While sales are down 3.7% from a year ago, total sales January to May 2019 are up 3.7% over the same months in 2018.   In addition, new home sales normally run around 70% of single-family housing starts.  In May, even with the decline, new home sales were 76% of these starts after hitting 84% earlier this year.  This tells us the pace of home building is likely to increase in the year ahead, which is part of the reason we think the US is nowhere close to recession.  Affordability has been playing a big role in the recent rebound, with mortgage rates having fallen nearly 100 basis points after peaking in November, while new home prices have moderated, down year-over-year in four of the five months so far in 2019.  Meanwhile, the fundamentals signal growth over the medium to long term.  Relative to population, the number of new home sales remains well below where it should be.  That means much more home construction will be needed; it's simple math.  Bottom line, we expect sales and construction in 2019 to outpace 2018 and continue the upward trend.  In other housing news this morning, different measures of home prices are also showing moderation. The national Case-Shiller index rose 0.3% in April and is up 3.5% from a year ago, a significant slowdown from the 6.5% gain in the year ending in April 2018.  In the past twelve months, price gains were led by Las Vegas, Phoenix, and Tampa, while the slowest price gains have been in Seattle, San Diego, and Los Angeles.  The FHFA index, which measures prices for homes financed with conforming mortgages, increased 0.4% in April, and is up 5.3% from a year ago, a deceleration from the 6.8% gain in the year ending in April 2018. Finally, on the manufacturing front, the Richmond Fed index, which measures mid-Atlantic factory sentiment, fell to 3 in June from 5 in May.

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