US: New Home Sales


Fri Jul 24 09:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
New Home Sales - Level - SAAR 550K 535K to 570K 482K 546K 517K

Highlights
Volatility is common for new home sales and there's plenty of it the June report where the headline plunged 6.8 percent to a far lower-than-expected annual rate of 482,000 and where revisions erased 40,000 from the prior two months.

But there is some good news in the report and that's a surge in supply of new homes on the market, up 3.4 percent in the month to 215,000. Greater supply points to greater sales ahead. On a sales basis, supply is at 5.4 months vs 4.8 and 4.7 in June and May.

Prices look soft in the report, at a median $281,800 which is up 0.5 percent in the month but down 1.8 percent year-on-year. The latter reading points to deep discounting compared to the year-on-year sales gain of 18.1 percent.

Regional data show big drops in the West and the Midwest in the month and a smaller drop in the South. But the Northeast is showing life with a second straight solid gain. Year-on-year, the South and Northeast lead with respective sales gains of 23.7 and 23.1 percent with the West and Midwest lagging at 10.9 and 5.7 percent.

The sales data in today's report, with the June rate the lowest of the year, are likely to shave second-quarter GDP slightly and take some of the shine off the housing outlook.

Market Consensus Before Announcement
New home sales have been posting strong gains with forecasters seeing another sharp rise for June, at a consensus 0.9 percent to a 0.550 million rate vs May's 0.546 rate. Builders are confident and are making for big gains in permits. But lead times in construction are long and lack of supply on the market is likely to constrain sales gains and lift prices.

Definition
New home sales measure the number of newly constructed homes with a committed sale during the month. The level of new home sales indicates housing market trends and, in turn, economic momentum and consumer purchases of furniture and appliances.



Description
This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as new home sales, investors can gain specific investment ideas as well as broad guidance for managing a portfolio. Each time the construction of a new home begins, it translates to more construction jobs, and income which will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items new home buyers might purchase. The economic "ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, new home sales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the new home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.