New single-family home sales increased 9.6% in July

New single-family home sales increased 9.6% in July to a 433,000 annual rate, easily beating the consensus expected selling pace of 390,000. Sales are up 31.6% versus the January low.
Sales were up in the Northeast, South, and West, but down in the Midwest.
At the current sales pace, the supply of unsold new homes fell to 7.5 months in July from 8.5 in June. The decline in the months’ supply was mostly due to the faster pace of sales, but also partly due to a continued decline in the inventory of unsold new homes. Inventories fell to 271,000 in July, down 52.6% from the peak in mid-2006, and the lowest since 1993.
The median price of new homes sold was $210,100 in July, down 11.5% versus a year ago. The average price of new homes sold was $269,200, down 10.8% versus last year.
Implications:  There are few places where the V-shaped recovery is more evident than the housing market. New home sales increased 9.6% in July, the largest one-month increase since 2005, which was at the peak of the housing boom. The increase in July comes on top of a 9.1% gain in June. The annual sales rate of 433,000 blew away the consensus expected pace yet again, and upward revisions increased sales over the prior three months. As we saw in Friday’s existing home sales report, the housing market is headed upward after 3½ years of declining sales. New home sales are up 4 months in a row, and have increased at a 121.8% annual rate since March. In other recent news, home prices are showing signs of recovery.  The Case-Shiller home price index, which covers the 20 largest metropolitan areas around the country, increased 0.7% in June (seasonally-adjusted), the first gain in more than three years.  Meanwhile, prices measured by the Federal Housing Finance Agency, which tracks homes financed by “conforming” mortgages, increased 0.5% in June, the second straight monthly gain.  Home sales and single-family housing starts have been in a rising trend since early this year.  Home prices were the last piece of the housing recovery puzzle and now even that is falling into place.  We may get one more modest leg down in home prices this fall, due to high-priced homes in major metro areas, but for the rest of the country (most of us) the trend is likely to be price gains from here.

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: 8/26/2009