New home sales are up huge amounts year-over-year but price is not following. On a seasonally adjusted annualized basis, news home sales are up 18.1% in the south (the largest region), and 40% in the Northeast (accounting for only a small increase in sales).

Bloomberg Econoday has more numbers.

Volatility is the name of game for the new home sales report where July’s headline surged, up a monthly 12.4 percent to a 654,000 annualized rate. A very small offset is a very modest 10,000 downward revision to June which now stands at 582,000. May is unrevised at 572,000. All these levels are at cycle highs while the sequential gains hint at sky-high momentum.

The surge in sales is apparently getting a big boost from seller discounting as the median price fell 5.1 percent to $294,600. The year-on-year price is suddenly in the negative column at minus 0.5 percent. These results confirm other indications of price softness, including recent FHFA and Case-Shiller data.

Lack of supply, in light of the sales gain, is becoming an even more pressing issue for housing. New homes on the market fell 7,000 in the month to 233,000 with monthly supply falling very sharply, to 4.3 months at the current sales rate from 4.9 months in June. In July last year, this reading was 5.2 months.

Strength in this report comes from the largest region which is the South where sales rose 18.1 percent to a 398,000 annualized pace. The Northeast, which is a very small region for new homes, surged 40.0 percent in the month but to only a 35,000 rate.

Housing data have been moving higher but not uniformly. Starts and permits data have been bumpy as has construction spending. But this report, together with data on sales of existing homes, are moving decisively to cycle highs and are pointing to housing as possibly the biggest positive surprise of the 2016 economy.

Highest Level Since 2007

The Wall Street Journal reports U.S. New Home Sales Rise to Highest Level Since 2007

Sales of newly built homes account for less than a tenth of total U.S. homebuying activity. Also, data on such purchases are volatile from month to month and subject to later revision. July’s increase came with a margin of error of plus or minus 12.7 percentage points.

New-home sales in July were up 31.3% from a year earlier. The latest figure brings new-home sales back to the level recorded just before the recession began.

But the pace remains well below the peak level of 1.39 million in July 2005. Last month was the first when the rate exceeded 600,000 since early 2008. Before the recession, the last full year below that mark was 1991.

Tuesday’s report showed there was a 4.3-month supply of newly built homes available at the end of July. That was the smallest supply in three years. The median sale price of a new home sold in July was $294,600, down slightly from $296,000 a year earlier.

January to July Sales at 1963 Level

new Home Sales 2016-08A

Price Points

new Home Sales 2016-08B

Needed Perspective

Those charts help put things into needed perspective. Despite massive increase in sales, price is now falling. Home builders would build higher priced homes if they could. It takes discounts to move houses now.

Mike “Mish” Shedlock