New Home Sales Burst To Best Level During The Spring

Housing is emerging as a positive surprise for the 2016 economy. New home sales burst to their best strength of the cycle during the Spring, coming in at a much higher-than-expected 592,000 annualized rate in June following a 572,000 rate in both May and April (both revised). To see the strength by comparison, the rate in June last year was 25 percent lower at 472,000.

Trend strength appears across regions led by the Midwest, up 44 percent year-on-year, with the South at the rear but still up 21 percent. Monthly data show slowing in the Northeast, where however sales totals are very small, and solid strength in the West which is a key region for home builders.

The gain in sales did not come at the expense of prices, at least in June. The median jumped 6.2 percent to $306,700 which, however, is only up 6.1 percent from a year ago. The mismatch between prices and greater strength in sales perhaps hints at price traction to come, in contrast to existing homes where prices are showing less strength.

One negative is supply in the new home market which looks to become an increasing problem. New homes for sale inched only 3,000 higher in the month to 244,000 with the supply at the current sales rate falling to 4.9 months from 5.1 months and compared against 5.5 months a year ago.

Housing had a very good Spring and looks to contribute solidly to overall economic growth. Existing home sales, released last week, are also at their hottest rate of the cycle.

Recent History Of This Indicator:
Small sample sizes often make for enormous monthly swings in new home sales where underlying growth is positive, at nearly a double digit year-on-year pace. For June, forecasters see sales coming in at a 562,000 annualized rate in what would make for a 19 percent on-year rate and a 2.0 percent monthly gain from May. May's rate of 551,000 stands as the second best of the cycle with April's outsized 586,000 at the top. But home builders were giving price concessions to boost sales early in the spring with the median price, in contrast to the healthy gain in sales, barely showing any year-on-year growth at all. Lack of supply has been a major negative in the new home market though more units did enter the market during May.