The Census Bureau reported new residential sales for June that came in at a rate of 592,000 (SAAR). This was above expectations, and a continued indicator that the Fed’s juicing of the market continues to provide a boost to new residential construction. The latest report shows that new home sales in June were 25.4 percent higher than last year. New home prices were also higher. The median price of a new home sold (contracted) in June was $306,700 and the average price was $358,200.

This was a good report for new home sales, but it is worth remembering that we’re still talking about volume that is roughly half of of the previous cycle peak. More importantly, new home sales would probably not be rising at all if it weren’t for looser mortgage conditions and mortgage interest rates that are once again near record lows. As the following chart shows, new home sales are being driven by lower mortgage rates. If July’s rate decreases don’t translate into better new home sales numbers, we may get another indicator that the Fed’s game is running out of steam. The current housing cycle is certainly not like the previous bubble, but unfortunately that doesn’t mean it’s any less dangerous. There is a great deal of window dressing going on in the U.S. real estate market, and very little organic growth to sustain lofty valuations.