August 23, 2017 – New single-family home sales represent the number of brand new houses that were purchased or committed to being purchased over the course of a month. This indicator has a trickle-down effect as demand rises for durable goods and consumer spending increases, boosting GDP. It is also a sign of strength in the consumer balance sheet to make the investment.
New home sales fell 9.4% in July to a 571,000 annualized rate, below June’s upward revision to 630,000. This was well below the consensus of 610,000. The median price increased 0.7% to $313,700 and year-over-year prices are up 6.3%. Sales in the Midwest showed strong gains while the South, West, and Northwest declined. The months’ supply of new homes grew 5.8 months.
New home sales experienced a significantly larger drop compared to existing home sales in July. Due to high volatile month-to-month movements, it is best to look at 3-month averages to get a better story. Although the 3-month average decreased to 606,000 from June’s 612,700, it still reported numbers over 600,000 and depicts a useful story. Another optimistic viewpoint from July’s reading is the increase of 4,000 in supply of new homes, now up to 276,000. This increase in supply bumped the monthly supply from 5.2 months to 5.8 months, moving closer to the balanced 6 month mark. Similar to existing home sales, there is a ripple effect in the home goods retail section of the economy when home sales fall. Not as many homebuyers are spending money on appliances and home goods; in return this does not push as much money through the economy.