The Census Bureau reported new home sales for June at a seasonally adjusted annual rate of 646,000 units. This was up 7 percent from revised May figures and 4.5 percent higher than a year ago. The previous three months were revised lower. The median price of a new home contracted in June was $310,400, almost unchanged from last year. The average price of a new home in June was $368,600, a decrease of $1500 from June 2018. Months of supply stood at 6.3 in June, up from 6.0 months of supply last year.
Translated on a more local level, the closest thing to the Census numbers for new home sales would be pending new construction activity. Here in the Dallas-Fort Worth area (which is still the largest new home market in the country), pending new construction sales were up 13 percent. Pending new construction sales were up 22 percent in Denton County, and 25 percent in both Dallas and Tarrant counties. Those are good numbers, but it’s important to keep in mind that not all pending new home contracts actually close. Life happens! Actual closed sales of new construction for June were much less impressive in Dallas-Fort Worth, rising a scant 1 percent.
While many industry pundits will try to spin this as a positive report, the writing on the wall points to more stagnation for the U.S. housing market. Yesterday we saw the 16th consecutive month of lower year-over-year existing home sales, the bulk of sales activity in the housing market. While this bump for new home sales in June is encouraging, it bears repeating that average mortgage interest rates were a full 77 basis points lower in June 2019 than June of last year. Based on this extremely favorable rate comparison amid the longest economic expansion in U.S. history, new home sales should be experiencing double digit growth…but they aren’t.
This anemic sales growth in the U.S. housing market is just another barometer of the waning economic growth we have seen recently. Years of trickle-down stimulus from the Federal Reserve and trickle-down fiscal policy from Washington are taking a toll on the housing market. The recent evaporation of foreign home purchases is also putting a damper on sales activity this year.
Global liquidity-driven asset bubbles are being exposed for what they are because the laws of nature are unavoidable. The business cycle has not been repealed. Home prices and home sales volumes are still at least somewhat dependent on people making enough money to afford the monthly carrying costs for a home. Low interest rates are great, but buyers are still dealing with record high prices in many U.S. real estate markets.
Existing home sales for June show that the real estate market is still choking on high prices…
Mortgage rates came crashing back down after the U.S. real estate market hit a wall…an affordability wall.
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