Home Builders remain optimistic even though New Home Sales fell in June to a seven-month low and May’s sales were revised sharply down.
Sales of new homes account for less than 10 percent of the housing market, but has a much large effect on the overall economy, as other new purchases transactions are created within the new home market.
The New Home Sales data tends to be volatile on a month-to-month basis and several revisions are commonly made after the report first comes out and June’s surprise decline along with the May revisions are at odds with other housing data like Existing Home Sales that have shown strong momentum.
Being that the report is often revised in the proceeding months of each report, we shouldn’t get too worried about this months report from the new home sales yet.
New home sales dropped 6.8 percent to a seasonally adjusted annual rate of 482,000 units, the lowest level since last November, the Commerce Department said. May’s sales pace was cut to 517,000 units from the previously reported 546,000 units.
Annualized Seasonally Adjusted New Home sales:
June 2015: 482,000
May 2015: 517,000 (revised)
April 2015: 534,000
March 2015: 494,000
February 2015: 545,000
January 2015: 521,000
December 2014: 495,000
November 2014: 449,000
October 2014: 472,000
September 2014: 459,000
August 2014: 454,000
July 2014: 403,000
June 2014: 408,000
Despite two straight months of declines in new home sales, the housing market recovery remains intact as new home sales were up 18.1 percent compared to June of last year.
Housing is being supported by a tightening labor market, which should unleashed demand from millennial home buyers. Government efforts to ease lending conditions for first-time buyers through mortgage finance firms Fannie Mae and Freddie Mac also have helped.
The existing home sales report released on Wednesday showed resales jumped to a more than eight-year high in June. Data last week showed building permits near an eight-year peak in June and housing starts increasing solidly.
The strong housing momentum suggests the economy remained on solid ground despite a surprise drop in retail sales last month and a struggling manufacturing sector, and should be able to absorb an interest rate hike expected as early as September.
The U.S. economy is on better footing than its global peers. Data on Friday showed Chinese manufacturing contracted in July to a 15-month low. Business activity in the euro zone slowed this month, with the weakness blamed on the impact of Greece’s debt crisis.
U.S. manufacturing, which has been hobbled by a strong dollar and spending cuts by energy companies, showed signs of stabilizing in July.
The U.S. Manufacturing Purchasing Managers’ Index rose to 53.8 this month from a 20-month low of 53.6 in June. A reading above 50 indicates expansion in the factory sector.
Despite the gain, investment spending cuts in the energy sector continued to weigh on sales.
There was a modest rise in new work from abroad, which ended three straight months of falling export sales across the manufacturing sector. Still, manufacturers were cautious about hiring.
The Markit survey confirms that U.S. manufacturing is likely to see only a sluggish pace of growth in the third quarter. Economists expect that housing will partly offset manufacturing’s drag on the economy this year.
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