Implications: The housing recovery made further strides in June, with new home sales easily beating consensus expectations and hitting the fastest pace since 2008. Sales of new homes rose 3.5% for the month and are now up 25.4% versus a year ago. It's important to remember that home sales data are very volatile from month to month, so let's not get too carried away, but we think there are a few reasons to expect housing to remain a positive factor for the economy in the months ahead. First, employment gains continue and wage growth is accelerating. Second, the mortgage market is starting to thaw. Third, the homeownership rate remains depressed as a larger share of the population is renting, leaving plenty of potential buyers as conditions continue to improve. And remember that, unlike single-family homes which are counted in the new home sales data, multi-family homes (think condos in cities) are not counted in this report. So a shift back toward single family units will also serve to push reported sales higher. The inventory of new homes rose 3,000 in June but remains very low by historical standards (see chart to right). Moreover, the recent recovery in inventories has been led by homes where construction is still in progress, or has yet to begin. As a result, homebuilders still have plenty of room to increase both construction and inventories. The median sales price of a new home is 6.1% ahead of last year, which will keep builders interested. In other housing news this morning, the national Case-Shiller price index rose 1.2% in May and is up 5.0% from a year ago. Price gains in the past year have been led by Portland, Seattle, Denver, and Dallas. On the manufacturing front, the Richmond Fed index, a measure of mid-Atlantic manufacturing sentiment jumped to +10 in July from -10 in June, signaling a strong rebound in activity. Looks like the Plow Horse might be getting a spring in its step!
Click here for PDF version