Sales of new homes fell back sharply in June but follow what turns out, after revisions, to be an exceptionally strong May and April. June's annual sales rate of 350,000 is 20,000 shy of the Econoday consensus but is offset by a 13,000 upward revision to May to 382,000 which is the highest rate in more than 2 years when government programs were stimulating sales. Further offsetting the June disappointment is a 15,000 upward revision to April which is now at 358,000.
The dip in June sales gave a lift to the supply reading which still, at 4.9 months at the current sales rate, is very tight which is a factor that's limiting sales. Completed new homes for sale, at 41,000, is the lowest on record. Tight supply has been giving a lift to prices this year which however did ebb back in June, down 1.9 percent to a median $232,600. Though the year-on-year rate is down 3.2 percent, the comparison is against a price spike in June last year.
Another striking detail in what turns out to be a very interesting June report is a collapse in sales in the Northeast which fell a record 60 percent in the month. Weather could be at play here but also the Northeast is the smallest region in terms of sales. Sales in the South, the largest region, also show a big decline of 8.6 percent but are against a strong comparison in May when they rose 9.4 percent.
All in all, this report isn't bad especially if sales pick up again in the July report this time next month. Next data on housing will be tomorrow with the pending home sales index which tracks contract signings for existing homes. The Dow first dipped and then quickly rebounded following today's report.
Market Consensus before announcement
New home sales rose a very solid 7.6 percent in May, following declines of 1.2 percent in April and 5.2 percent in March. Sales came in at a higher-than-expected annual rate of 369,000 in May. The surge of buying in May brought down months' supply to 4.7 months from 5.0 in April and the recession high of 12.2 for January 2009. However, the latest existing home sales number showed a decline of 5.4 percent for June, indicating that new home sales also might be soft for the month.