U.S. new home sales dropped a larger-than-expected 8.3% in August, to 795,000 units annualized, the lowest level in more than seven years. Although there were rumours of a double-digit decline ahead of the release, the fact that the three prior months were also revised down tempered any "better-than-worst-feared" talk.
New homes available for sale slipped 1.5% to 529,000 units. Although this is down for the fifth consecutive month, relative inventory levels remain elevated because demand has been falling more sharply than supply. Month's supply stood at 8.2, up 0.6 ppts from July and just a notch below March's 8.3 reading, which was the highest in more than 16 years.
The median sale price of a new home is down a steep 7.5% y/y, and even though this is not a great measure of house price deflation, it does support the dismal story that was already painted by Tuesday's S&P/ Case-Shiller home price index.
The Bottom Line: Weak new and existing home sales along with housing starts and building permits point to yet another hefty drag on GDP growth coming from the housing sector during the third quarter, and it shows no signs of letting up anytime soon.
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A. Mark Argentino
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