New home sales fell another 2.4% to an annual rate of 412,000 in July, down 10,000 from an upwardly revised June figure of 422,000. The last three months of sales averaged the same as the annual figure for 2013 at 429,000 — but in contrast to the first two months of the year that averaged 445,000 and the last quarter of 2013 that averaged 446,000. Most of the July drop was concentrated in the West, which dropped 16,000 sales on an annual basis.
The new home sales series from the US Census Bureau exhibits monthly volatility because of a small sample size. Technically speaking, the annualized monthly sales reports must move by more than 11.9% to be considered a change and the regional variations must be even larger. Of course, that does not stop analysts from trying to make sense out of the changes. But in this case, the report is counter intuitive to other trends and in the opposite direction from most housing reports for July.
This report is in contrast to the NAHB/Wells Fargo Housing Market Index that rose 2 points to 55 in August for the second consecutive month above 50. New single-family housing starts increased 8.3% in July after an unusually large decline in June. July single-family permits were the highest since November 2013. Existing home sales also rose 2.4% in July for the second consecutive month above 5 million since October 2013.
Headwinds do remain including tight credit that has been particularly harsh on first time home buyers. The slow return of the first time home buyer has reduced new home sales directly and indirectly. While first timers are less important than repeat buyers in the new home market, they are significant in the existing market and allow the existing home owner to sell and buy a newly built home.
New home inventory did increase again, rising to 205,000, up 4.1% over June and the highest since September 2010. Sales prices rose 2.9% year-over-year as the composition of sales in the $150,000 to $199,999 segment increased and the share of homes sold for over $500,000 fell.