The U.S. housing market has been one of the strongest performers
this year in an otherwise
U.S. economy. It has been helped along by steady U.S. job
gains, low U.S. mortgage rates, and a limited supply of available
U.S. homes for sale.
Jumping into this mix, the U.S. Commerce Department reported new
homes sales for August.
What Did August's New Home Sales Report Show Us?
It said sales of new U.S. homes rose +7.9% to a seasonally adjusted
annual rate of 421,000 in August. This amounted to a rebound
after a large drop in July. Three of four regions posted
gains. Sales showed the fastest pace since January. Gains met
expectations. Chiming in before the report, economists
predicted August sales of 420,000, up from 394,000 in July.
Other Factors in Play:
The look forward is helped and hindered by the following factors:
(1) Mortgage rates have risen a full percentage point since
May. But since early September, we have seen the 30-year fixed
mortgage benchmark --the U.S. 10-year Treasury rate-- backtrack
from 3.0% to 2.65%. That is an August level.
Tack 150 basis points on to acquire 30-year fixed mortgage
rates. Some economists think September's higher mortgage
rates will steal momentum from the recovery. They cite the
earlier July drop in new-home sales as building evidence.
That made this morning's August report all the more
Truthfully, don't expect to see a change in behavior driven by
high September mortgage rates until October new home sales data is
(2) Yesterday, we saw fresh Case-Shiller U.S. House Price Index
data. It showed single-family home prices rising +12% over
last year. Remember, this fresh Case-Shiller data is two
months old. It takes them two months to comb data.
More home equity means less homes underwater, and stronger
(3) Americans are still buying
single-family homes. The National Association of Realtors reported
last week that sales of previously occupied homes in August rose to
a seasonally adjusted 5.5 million annual pace. That's a
healthy level. It's the highest in more than six years.
A strong secondary market should be a positive for new home
RTI QUESTION: Going forward, what SINGLE factor is
MOST IMPORTANT to a new leg in new home sales?
House Price Momentum
Strong Existing Home Sales
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