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Brian Wesbury
Chief Economist
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Bob Stein
Deputy Chief Economist
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 | New single-family home sales increased 23.6% in June to a 330,000 annual rate |
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Implications: After plunging in May to a record low (dating back to 1963), new home sales rebounded sharply in June. The homebuyer tax credit – which required a contract on a home by the end of April – has obviously had a large influence on the recent volatility of new home sales. New homes were sold at a 422,000 pace in April as people got in their purchases before the tax credit expired, but then plummeted to a 267,000 pace in May. The rebound in June shows that the worst of the tax credit "hangover" may be over, although this is still the second slowest month on record. Given demographic trends, we believe over the next several years the annual rate of sales will eventually increase to 950,000. At present there are only 210,000 new homes in builders' inventories, the fewest since 1968, when the US population was 35% smaller than it is now. At the recent pace of sales, it would take 7.6 months for builders to sell this inventory. However as the pace of sales gradually increases back to 950,000, the months' supply will fall to a record low of 2.6, assuming builders keep the number of available homes unchanged at current levels. In turn, this signals that home building has been so slow for so long that there is room for builders to increase construction activity.
Click here to view the entire report.
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These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
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