Implications: Another housing number, another Plow Horse report. New single-family home sales declined 2.4% in July, but this comes on the back of an upwardly revised June number. The recent slowdown in new home sales does not mean we are back in a housing recession; home construction remains in an upward trend and new homes sales are still up 12.3% from a year ago. Nonetheless, new home sales still remain at depressed levels and we believe there are a few key reasons for this. First, the homeownership rate remains depressed as a larger share of the population is deciding to rent rather than own. Second, buyers have shifted slightly from single-family homes, which are counted in the new home sales data, to multi-family homes (think condos in cities), which are not counted in the report. Third, financing is still more difficult than it has been in the past. The inventory of new homes rose 8,000 in July, but still remains very low as the chart to the right shows, and most of the inventory gains are for homes not started, instead of homes completed. Homebuilders still have plenty of room to increase both construction and inventories. On the pricing front, the median sales price for a new home fell 3.7% in July to $269,800, but this number is not seasonally-adjusted. Prices are still up 2.9% versus a year ago and we still expect a similar gain in the year ahead. Once again, the housing recovery remains intact, despite the fits and starts which are to be expected when the overall economy is a Plow Horse, not a Race Horse.
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Posted on Monday, August 25, 2014 @ 11:07 AM
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