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New Home Sales Skyrocket in August

Not sure what happened in August but new home sales were not just up for the month they skyrocketed according to the Census Bureau’s New Residential Construction report.

  • M-O-M: Sales of new single‐family houses skyrocketed 28.2% to a seasonally adjusted annual rate of 685,000 in August.
  • Y-O-Y: Despite the big month, new home sales are still down 0.1% when compared to the same time last year.

Way Off. Talk about a miss, economists projected sales would fall 2.2% in August.

South Dominates. As usual, when talking about real estate in 2022 the South continues to dominate all other regions. The South was responsible for 69.3% of the 153,00 jump in August which means the South now represents 68.2% of new home sales in the country.

  • The West took the number two spot with 19.0% of new home sale activity in August followed by the Midwest (5.0%) and the Northeast (3.7%).

Mixed Year. In total, new home sales are almost flat (-0.1%) thanks to very different activities in the four regions. The South is having the best year up 10.0% followed by the Midwest (+5.0%), the Northeast (-22.0%), and the West (-24.0%).

Inventory & Prices Down. With a big jump in sales, it is not surprising that inventory levels fell for the month. The month’s supply at the current sales rate fell 25% to 8.1 months while the actual number of homes for sale didn’t move all that much a slight 0.6% decline.

  • Rising rates continue to put downward pressure on prices as the median sales price fell 0.6% to $436,800 and the average price was down 4.6% to $521,800.

Analysis. The big jump in August took a lot of people by surprise.

  • Conor Sen of Bloomberg seemed perplexed “Surprisingly strong new home sales print, wonder what that’s about.” As did Ian Shepherdson of Pantheon Economics “New home sales; they’re kidding, right?”
  • Robert Dietz ,Chief Economist at NAHB, believes this is not sign things are turning around for housing “Aug new home sales data is an outlier due to a brief and now ended retreat for mortgage rates. Sales increased 29% to a 685k annualized rate. However, new home sales are down more than 14% year-to-date. And sales will be lower in Sept as mortgage rates increase”
  • Len Keifer, Deputy Chief Economist at Freddie Mac thinks consumers took advantage of falling rates “Looks like new home sales might have responded to that mini dip in rates we had in June and July, resulting in a bump up in August sales”

BOTTOM LINE: As usual, thank God for the South.

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