New home sales fell 7.6% in August to a seasonally adjusted annualized rate (SAAR) of 609,000 units.
However, economists were unusually pessimistic this month as the Econoday Consensus estimate was 598,000 sales.
Prices also declined. The median new home price is down 3.1% for the month and 5.4% from a year ago.
New home sales may have fallen back by a monthly 7.6 percent in August, but the 609,000 annualized rate is still above Econoday’s consensus for 598,000. And a major plus in the report is a surprise 5,000 upward revision to July which now stands at a cycle high of 659,000 and a monthly gain from June of 13.8 percent. The volatility of this series had made a downward revision to July a major risk in today’s report.
Prices are coming down which points to builder discounting. The median, at $284,000, is down 3.1 percent on the month and down 5.4 percent on the year. Prices aren’t getting much lift from stubbornly low supply which is at 4.6 months. Total new homes for sale, at 235,000, did rise in the month but only slightly. Year-on-year, supply is up 8.3 percent which, however, is far under the 20.6 percent gain in year-on-year sales.
Sales strength is coming out of the West, a focused region for builders where the 162,000 annualized rate is up 8.0 percent on the month and a whopping 35.0 percent on the year. All other regions show monthly declines including the largest region which is the South where the 343,000 rate is down 12.3 on the month but still up 15.9 percent on the year.
This is a very positive report which underscores the accelerating strength of the new home market, strength that is making up for less far momentum on the resale side.
The new home market is one of the bright spots of the 2016 economy, with new home sales accelerating impressively through the spring and early summer. But forecasters see a pause for August, calling for a consensus 5.1 percent monthly decline to a 598,000 annualized rate following July’s 12.4 percent surge to 654,000. The new home sales report excludes multi-family homes and tracks only the key single-family home category where permits, in a sign of optimism for future sales, have been on the climb.
Very Positive Report?
Bloomberg calls the report very positive. Is the report positive at all?
Declining price and low inventory suggests builders are increasingly wary and are targeting lower and lower income levels to make sales.
Effect on GDP Estimates
I am unsure how this report affects GDP estimates. The upward revision is a positive. Price action is negative. The decline of 7.6% could go either way. It all depends on what the Atlanta Fed GDPNOw and FRBNY models predicted would happen.
If the models were overly pessimistic, this report will add to estimates. If the modes expected better, this report will subtract from estimates.
My guess is a range of -0.1 to +0.1 percentage points, most likely flat to +0.1%.
Mike “Mish” Shedlock.