New Home Sales Lower Than Expected

The housing trend is visibly fading at the half-way point, opening the year on a solid rise before flattening out and slowing in May and June. This is true of existing home sales which were reported yesterday and is especially true with today's report on new home sales which came in at a lower-than-expected 646,000 annual rate. The 3-month average is at 636,000 which compares unfavorably against a 673,000 peak in April.

The median price firmed in June to $310,400 but is no better than dead flat versus June last year. Supply edged higher to 338,000 new homes on the market and on a sales basis is at an ample 6.3 months. Sales jumped in the West, edged higher in the South, and slipped in the South and Northeast.

Market fundamentals should be pointing to better results for new home sales: there's plenty of homes on the market, prices are flat, employment is strong, and mortgage rates have come down sharply. Yet today's report is consistent with anecdotal reports that foreign buyers, due to trade tensions, have been scaling back US home buying. In any case, these results do fit in with arguments for a rate cut, a cut that would likely pull mortgage rates even lower in what couldn't but help housing.