July New Home Sales +2.8% to 870K Unit Rate
The July sales rate was well above the median forecast of 820K.
On an underlying trend basis, we have been looking for a floor near a 1.000 mln SAAR by year-end. Recent turmoil in the credit market, however, could put this forecast in jeopardy, and we would not be surprised to see sales rates in the high 800Ks to the low 900Ks persist for some time.
Our longer-term forecast for demand to level out near a 900K to 1 mln SAAR remains in place and that remains our forecast for 2008.
Interestingly, the relation between mortgage applications for purchases and actual purchases of new homes seems to have broken down in the past year or so, with applications well above actual sales. This could be due to multiple applications being filed by potential homebuyers in order to ensure a mortgage approval from someone.
In todays report, the July new home sales rise was driven by a rebound in the West (213K after 174K in June and 203K in May). The Northeast was weak (53K after 70K and 88K), while the Midwest (112K after 113K and 144K) and the South (492K following 489K and 446K) were little changed in July.
The median home price rose to $239,500 in July from $230,600 in June, with the y/y change +0.6% after -5.2% in June. However, regional mix undoubtedly played a role here, as homes in the West are relatively expensive, and sales jumped in that region in July.
Homes for sale were edged down to 533,000 in July from 538,000 in June, and these followed 5341000 in May, 547,000 in April, 548,000 in March, 544,000 in Feb, and 536,000 in Jan.
The SA months supply is now at a 7.5, which follows 7.7 months in June, 7.5 months in May, 7.4 months in April, 8.3 months in March, 8.1 months in Feb, and 7.2 months in Jan. In the past, a 5.5 to 6 months supply was normal, but it had been near 4 months for several years before the current move up as inventories surge. The move up to over 6 months is a sign of increasing slowness as inventories rise.