August New Home Sales

New home sales were strong in August according to the Census Bureau.  Transactions tallied 504,000 on a seasonally adjusted annualized rate.  This followed July’s upwardly revised count of 427,000 (originally 412k) and was in stark contrast to the disappointing figure in the existing home market a few days earlier. Year-over-year, the pace of sales has increased by 33.0 percent!

Surging sales have left a tight supply.  There are currently 203,000 new units for sale on the market.  If August’s pace was to continue and no other homes were built, the entire stock of new dwellings would be depleted in just 4.8 months.  This dearth of inventory cuts two ways: it may slow transactions as potential buyers are unable find a suitable home, but it could have a constructive impact if builders are encouraged to increase their output in the months ahead.

Price measures were mixed in the period, but most regions experienced growing sales.  The median cost of a new home slipped 1.6 percent to $275,600 in the period.  The average price increased $2,800 to $347,900 in August.  With no change in the number of transactions, only the Midwest did not experience faster sales over the prior period.  The West and Northeast surged 50.0 percent and 29.2 percent respectively.   Sales in the South grew by 7.8 percent; this area is the largest portion of the country and accounted for nearly 52 percent of the transactions in August.

Housing was mixed in August.  The existing homes market is much larger than this new home counterpart, and its sales dropped 90,000, leaving the housing market with a net contraction for the month.  To be fair, new home transactions are counted earlier in the sales process, so this portion of the market may be an early indication of better outcomes in the months ahead for housing.  After homes are purchased, Americans like to add a personal touch to their dwellings by filling them with new durable goods.  If housing accelerates again, it should have a positive knock-on effect for the economy.       (by C. Cox)