New Home sales rose to a Seasonally Adjusted Annualized Rate (SAAR) of
592,000 vs. a Bloomberg Econoday consensus estimate of 562,000.
Interestingly, home price appreciation as measured by Case Shiller
unexpectedly declined by 0.1%. That is on top of a revision of for last month
from +0.5% to-0.2%.
Housing is emerging as a positive surprise for the 2016 economy. New home
sales burst to their best strength of the cycle during the Spring, coming in
at a much higher-than-expected 592,000 annualized rate in June following a
572,000 rate in both May and April (both revised). To see the strength by
comparison, the rate in June last year was 25 percent lower at 472,000.
Trend strength appears across regions led by the Midwest, up 44 percent
year-on-year, with the South at the rear but still up 21 percent. Monthly
data show slowing in the Northeast, where however sales totals are very
small, and solid strength in the West which is a key region for home
builders.
The gain in sales did not come at the expense of prices, at least in June.
The median jumped 6.2 percent to $306,700 which, however, is only up 6.1
percent from a year ago.
New Homes Sales 1963-Present
The above chart puts a needed perspective on the strength of the the
housing recovery. Sales are where they were in January of 1963!
Home Prices Unexpectedly Decline
The Wall Street Journal reports U.S. Home-Price Increases Maintained Strong Pace in May.
“S&P/Case-Shiller Home Price Index rose 5%, matching April’s increase.
Home prices continued rising quickly in May, further proof that the housing
market had its strongest spring since the recession,” says the Journal.
However, for the last two months, home prices actually fell. Bloomberg
Econoday provides this comparison.
Highlights
Home sales are up while home prices are down. Case-Shiller’s 20-city
adjusted index fell 0.1 percent in May, well under expectations for a 0.4
percent gain. FHFA house price data released last week were also much weaker
than expected. Making matters worse is a steep downward revision to April, now
at minus 0.2 percent vs an initial plus 0.5 percent. But the trouble is at
least limited to April and May as March is revised 1 tenth higher to a very
strong 0.9 percent.
Unadjusted data, which are tracked closely in this report, are not revised
lower for April, holding at a solid 1.1 percent gain reflecting the heavy
housing activity in the Spring. The monthly result for May is plus 0.9
percent. Year-on-year, the unadjusted rate is at only plus 5.2 percent, down
from an unrevised 5.4 percent in April and making the 6 percent line, which
prices had been testing earlier this year, a distant memory.
Seasonal adjustments are heavy in the spring as they cut levels to match
lighter activity during the other seasons. Further clouding comparisons is
the fact that readings in this report are 3-month averages, not single month
results. But the bottom line is very clear, that home prices, despite
thin supplies of homes for sale, are softening.
When discussing Case-Shiller numbers it’s important to understand the numbers
are reported two ways, seasonally adjusted and unadjusted in addition to
year-over-year comparisons that are always unadjusted. In this case,
Bloomberg provides the correct take. Prices are weakening. If that continues,
year-over-year numbers will follow.
Mike “Mish” Shedlock
