Increase in New Home Sales

New single-family home sales increased 11.0% in June to a 384,000 annual rate, easily beating the consensus expected selling pace of 352,000.
Sales were up in the Northeast, Midwest, and West, but down in the South.
At the current sales pace, the supply of unsold new homes fell to 8.8 months in June from 10.2 in May. The decline in the months’ supply was due to both the faster pace of sales and a continued decline in the inventory of unsold new homes. Inventories fell to 281,000 in June, down 50.9% from the peak in mid-2006, and the lowest since 1993.
The median price of new homes sold was $206,200 in June, down 12.0% versus a year ago. The average price of new homes sold was $276,900, down 7.5% versus last year.
Implications:  New home sales increased 11% in June, the largest one-month increase in almost nine years. At a 384,000 annual rate, sales blew away the consensus expected pace, coming in higher than any of the 63 economists who made a forecast. After bottoming in January, new and existing home sales are up 17% and 9%, respectively. Despite the recent increase, new home sales are still well below their long-term trend of about 950,000 per year, suggesting sales will continue to move up substantially over the next few years. As good as the sales data were, the inventory figures were even better, boding well for increases in home construction starting later this year. Back in January the months’ supply of new homes was 12.4; now it’s down to 8.8. The number of new home homes for sale is less than half of the inventory peak in 2006 and the number of unsold new homes under construction has not been lower in about four decades. Falling home inventories and rising home sales are an important part of the V-shaped recovery the US has been in since earlier this summer.
This information contains forward-looking statements about various economic trends and strategies. You are cautioned that such forward-looking statements are subject to significant business, economic and competitive uncertainties and actual results could be materially different. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time and are the opinion of the individual strategist. Data comes from the following sources: Census Bureau, Bureau of Labor Statistics, Bureau of Economic Analysis, the Federal Reserve Board, and Haver Analytics. Data is taken from sources generally believed to be reliable but no guarantee is given to its accuracy.
Brian S. Wesbury – Chief Economist
Robert Stein, CFA – Senior Economist
Date: 7/27/2009