The Census Bureau reported new home sales for July at a seasonally adjusted annual rate of 627,000. That translates to a 1.7% decline from June’s pace but up 12.8% year-over-year. The median price of a new home contracted in July was $328,700, an increase of 1.7%. The average price of a new home sold (contracted) in July posted at $394,300, a rise of 5.9%.

The July figures for new home sales were below estimates, and that year-over-year increase is a bit misleading. July of last year was a very poor month for new home sales, thus making for a really easy comparison. The previous months of sales were also revised lower. The inventory of new homes for sale in July stood at 5.9 months.

Combined with tepid existing home sales for July which declined 0.7 percent, the latest numbers for new home sales provides more evidence that buyers are suffering from price fatigue in an inflated real estate market. The good news is that mortgage interest rates have cooled off lately. The yield spread between the 10-year Treasury and the 2-year Treasury hit 21 basis points today, further indication that the real economy (and real demand) are not quite as robust as the headline statistics would indicate.

The bitter reality is that the world is still awash in debt and central bank interventions. As I have noted before, that debt is deflationary! Dr. Edward Yardeni was nice enough to share some of his charts from his latest Global Economic Briefing: Central Bank Balance Sheets. While the Fed may be pulling away the punch bowl ever so gradually, you would barely know it taken into context with the other major central banks which keep printing away. I would encourage you to take a look at the other charts in Dr. Yardeni’s presentation.



Figure 3 Yearly Change Total Central Bank Assets

Suffice it to say, there’s still a great deal of liquidity sloshing around the global economy, much of propping up zombie European financial institutions as well as inflated U.S. asset prices.

If you are wondering why mortgage rates haven’t continued to shoot higher, this should help you understand what’s going on. The real economy simply won’t sustain higher rates. Any meaningful rise in mortgage rates from current levels would certainly be troublesome for the housing market, and thus rates have once again subsided, with the yield on the 10-year Treasury still below that “line in the sand” of 3.0%.

NTREIS trends data for July shows that new construction sales in the DFW area were rather flat. Average prices for DFW new homes closed in July were also flat, showing exactly zero change from last year. Pending sales of new homes in the Dallas Fort Worth area show an 11 percent increase.