Analysts at Nomura offered their New Home Sales data review, a key area of interest following the FOMC minutes yesterday highlighting the market as a risk.
Key Quotes:
“New home sales fell 1.7% m-o-m to 627k in July, below expectations (Nomura: 644k, Consensus: 645k), from upwardly revised 638k in June.
While sales in the Midwest and West rebounded, sales in the Northeast and South slowed sharply. The months supply indicator inched up to 5.9 months in July from 5.7 as sales continued to slow. Ongoing supply-side challenges helped lower both homebuilding activity and home sales and are likely to remain as constraints in the near term. Demand remains strong, however, boosted by firm consumer fundamentals. The share of homes sold that are not yet started jumped sharply to 33.8% in July from 27.3% in June, above its current sixmonth moving average of 28.9%. This measure suggests that buyers rushed to purchase new homes in July that have not even been started and implies a pick-up in demand. Despite firm demand, home builders continue to face challenges such as rising material cost and shortage of skilled construction labor. Given these constraints, we expect only modest growth in new home sales in 2018.”
“GDP tracking update: Weaker-than-expected new home sales suggest more drag from brokers’ commissions (part of residential fixed investment) to real GDP growth in Q3. Residential investment should remain a drag in Q3 following slowdown in Q2 and Q1. After rounding, our Q3 real GDP tracking remains at 3.0% q-o-q saar.”
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