• New home sales slumped 13.4% to 394,000 in July 2013, widely missing market expectations for 487,000 annualized unit sales in the month.
• The inventory of unsold new homes rose 4.3% to 171,000 in July from 164,000 in June, which combined with the decrease in sales in the month, resulted in the months’ supply jumping to its highest level since January 2012 at 5.2. This is, however, still indicative of tight inventories compared to the longer-run average of six months’ supply.
• While the sharp decline in new home sales is disappointing, the new build sector represents just 8% of total single-family home sales in the US, and the sizable jump in existing home sales in July resulted in total single-family home sales rising to 5.2 million annualized units in the month, which is the highest level since the homebuyers’ tax credit-related surge seen in November 2009. The brighter economic outlook and the attendant improvement in the labour market are offsetting the modest deterioration in housing affordability due to the combination of rising prices, the recent uptick in mortgage rates, and ongoing support of housing demand, which in turn is supporting continued growth in residential construction.
Sales of new single-family homes in the US slumped by 13.4% to 394,000 annualized units in July 2013 to more than reverse the previous month’s downwardly revised 3.6% gain to 455,000 (initially reported as an 8.3% gain to 497,000). Sales were also downwardly revised in May and April (to 439,000 and 446,000, respectively, from previously reported respective levels of 459,000 and 453,000). New home sales in July were well below market expectations of 487,000 annualized units and represented the lowest level since last October. The sizable headline decline in July reflected weakness across the country, with sales falling in the West (-16.1%), South (-13.4%), Midwest (-12.9%), and Northeast (-5.7%).
The inventory of unsold new homes rose 4.3% to 171,000 in July from 164,000 in June. The increase in homes available for sale combined with the decrease in sales in the month resulted in the months’ supply at the current sales rate jumping to its highest level since January 2012 at 5.2. This, however, represented a tight supply of unsold homes compared to the longer-run average of six months’ supply.
While the sharp decline in new home sales is disappointing, the new build sector represents just 8% of total single-family home sales in the US, and the sizable jump in existing home sales in July resulted in total single-family home sales rising to 5.2 million annualized units in the month, which is the highest level since the homebuyers’ tax credit-related surge seen in November 2009. The brighter economic outlook and the attendant improvement in the labour market are offsetting the modest deterioration in housing affordability due to the combination of rising prices, the recent uptick in mortgage rates, and ongoing support of housing demand, which in turn is supporting continued growth in residential construction. We continue to expect that this momentum will carry through until the end of this year and into 2014 as activity in the new build sector returns to historically normal levels.
RBC