New US home sales plunged in July, closely watched data out Tuesday showed.
The 511,000 annual rate was the slowest since January of 2016 and fell woefully short of the 575,000 pace economists expected.
Thanks to an upward revision to April’s data, last month’s 12.6% monthly drop counted as the largest since February of 2021. It was the sixth decline in seven months (figure below).
Figures for both May and June were revised lower.
Tuesday’s release was the latest in a spate of unfortunate readings, which included an eighth consecutive drop in home builder sentiment, a fifth decrease in single-family starts and a sixth straight drop in existing home sales.
Together, the numbers underscore the “housing recession” narrative and underline the impact of higher mortgage rates.
Although both median and average prices rose from June (after falling sharply during that month compared to May), the YoY rate of appreciation for the median home decelerated to the slowest since November of 2020 (figure below).
July marked the first time in more than a year that the 12-month rate was below double-digits. The annual pace of average price gains reaccelerated, though.
Increasingly, headlines reflect the notion that America may be sitting atop a surplus of new homes without realizing it. It’s possible, I’ve argued, that builders who rushed to keep up with voracious demand during the post-pandemic boom will find themselves grappling with excess inventory, much like America’s largest retailers.
Months’ supply for July was 10.9, the highest since the S&P bottomed in March of 2009 following the subprime bust (figure on the left, below). It was among the highest readings in recorded history.
The figure on the right (above) continues to look very ominous to me.
At the end of last month, there were 464,000 new homes for sale. That was the most since 2008. 90% of them either weren’t finished or weren’t started.
I don’t see much utility in breathless editorializing. The trend is clear. Mortgage rates are off this year’s highs, but both hard data and anecdotal evidence from around the country suggests the market is cooling in real time.
No locale is immune. The number of price drops in the Hamptons was 94 in July, according to Out East, more than double April’s figure. Bloomberg described a home with seven bedrooms and six and a half baths in Water Mill, which was listed in June at almost $6 million. “After about 30 showings in the first four weeks, the sellers only received one offer, which was below asking,” Misyrlena Egkolfopoulou wrote Monday. The price was eventually cut by $745,000.
It is really obvious that many leading indicators in the economy are weaker and turning down- housing, inventories (up is weaker), oil & gas companies great performance (late cycle indicator), inverted yield curve, wider credit spreads, Fed tightening. We got it all going on. So, if Larry and Muhammed want to bloviate about how far behind the FOMC is tune it out. It is noise.
H-Man, while housing is slowing, it also creates a benefit that buyers who have been locked out of the market due to sky rocketing prices may find solace in lower prices. But I suspect that pent up buyer demand will also create a floor for home pricing. In Orlando my neighbor listed at market in June, when he cut the price by 15% from the original listing price, it finally sold yesterday.