New Single-Family Home Sales Declined 8.1% in June

 
Implications: Forget about new home sales for a minute. New claims for unemployment insurance dropped 19,000 last week to 284,000, the lowest since February 2006, which was at the peak of the housing boom. The Labor Department said there was nothing unusual about last week's reports from the states, but noted the data are often volatile this time of year due to summer-related auto plant shutdowns. This suggests there were fewer shutdowns than normal last week. Continuing unemployment claims declined 8,000 to 2.50 million. Plugging these figures into our payroll models, which are rated #1 by Bloomberg for the past two years, suggests nonfarm payrolls increased 218,000 in July, while private payrolls grew 216,000. These forecasts will likely change next week as we get data from ADP and Intuit, as well as one more week of unemployment claims. On the housing front, new single-family home sales dropped steeply in June and were revised substantially lower in May. Today's report came in well below even the most pessimistic forecast for sales in June. This does not mean we are back in a housing recession; home construction remains in an upward trend and new homes sales have been hovering in the same range for the past two years. There are a few key reasons why new home sales remain so low. 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 in June, but still remains very low 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. 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 Thursday, July 24, 2014 @ 11:46 AM

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