New Home Sales Show Strength In August Report

Because of a small sample, new home sales can be very volatile month-to-month as they are in the August report where, at 552,000, the annual rate came in far above the high-end estimate. This is the highest rate since February 2008. Adding to the strength are 15,000 upward revisions to both July and June.

In especially welcome news for builders, the sales strength pulled supply relative to sales even lower, to 4.7 months from 4.9 months. Still, low supply is a constraint on sales in contrast to pricing which remains favorable, at a median $292,700 for a 0.5 percent gain on the month but at a paltry year-on-year gain on only 0.3 percent. By comparison, the year-on-year sales gain is 22 percent.

Regional data show August strength for the Northeast and more importantly the South which, for new home sales, is larger than all other regions combined. Year-on-year, sales in the South are up 27.6 percent which leads the regions. At the rear is the West where sales growth, however, is still in the double digits at plus 11.4 percent.

Volatility aside, this report is impressively strong and likely marks an upturn for housing data which, like Monday's existing home sales report, had been showing limited and uneven strength.

Recent History Of This Indicator:
A small rise is expected for new home sales where the consensus is calling for a 515,000 rate in August from July's 507,000. Limited supply has been holding back sales and any additional troubles in August could be blamed on stock market losses. Recent sales may be flat but year-on-year growth is very strong, trending at 20 percent.