September new home sales came in at a seasonally adjusted annualized rate (SAAR) of 593,000 units, a bit under the Econoday Consensus Estimate of 601,000.
The key headline in today’s report is the massive downward revision to reported numbers in July and August.
August sales went from 609,000 to 575,000. July sales went from 659,000 to 629,000. As is typically the case, the Econoday parrot proclaimed this as good news.
New home sales in September, up 3.1 percent to a 593,000 annualized rate, proved very solid though sharp downward revisions to both August (575,000 from 609,000) and also July (629,000 from 659,000) do lower the degree of what is still, however, solid strength in the new home market. Year-on-year, sales are up 30 percent in what is a sharp contrast to the fractional 0.6 percent gain on the resale side.
A clear positive in the report is a gain in prices, up 6.7 percent in the month to a median $313,500. And further price gains can be expected as the year-on-year gain, in contrast to the surge in sales, is only 1.9 percent.
Holding back activity, however, will be supply which remains limited, at 4.8 months vs 4.9 months in August and 5.8 months in September last year. New homes on the market stand at 235,000, nearly unchanged from 236,000 and 234,000 in the prior two months.
Regional sales data show a 3.4 percent gain for the South to a 338,000 rate, offset by a 4.5 percent decline in the West to 147,000. The two smallest regions posted gains with the Midwest up 8.6 percent to 76,000 and the Northeast up 33 percent to 32,000. Year-on-year rates for the two leading regions are both strongly positive with the South up 26 percent and the West up 32 percent.
Revisions are always a major wildcard for this series where sample sizes are small which puts the emphasis on averages. Here the story is solidly positive with the third-quarter average at 599,000 vs 565,000 in the second quarter. Strength in the new home sector, despite low supply and construction constraints, remains one of this year’s top economic stories.
Last month, Econoday called a 7.6% decline “very positive”. For details, please see New Home Sales Decline 7.6%, Median Price Down 3.1%: “Very Positive” Says Econoday.
The revised decline was from 629,000 to 575,000. That makes the revised decline 8.6% from July. Moreover, July itself was revised lower from June by 4.6%.
Amazingly, the Econoday parrot is sticking with its positive assessment. In contrast, this is what I had to say last month: “Bloomberg calls the report very positive. Is the report positive at all?”
Today we have our answer. It wasn’t.
Effect on GDP Estimates
New home sales today are less than they were in April of 1963. I will give Bloomberg one thing, the trend is up.
It’s generally tough gaming the effect on GDPNow and Nowcast model estimates, but here is my stab:
Mike “Mish” Shedlock.