{"id":320,"date":"2014-09-24T10:48:20","date_gmt":"2014-09-24T14:48:20","guid":{"rendered":"http:\/\/naroffeconomics.com\/?p=320"},"modified":"2014-10-15T10:49:55","modified_gmt":"2014-10-15T14:49:55","slug":"august-new-home-sales","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=320","title":{"rendered":"August New Home Sales"},"content":{"rendered":"

KEY DATA:<\/strong> Sales: +18%; West: +50%; Inventories: -14.3%: Prices (Year-over-Year): +8%<\/p>\n

IN A NUTSHELL:<\/strong> \u00c2\u00a0\u00c2\u00a0\u00e2\u20ac\u0153Home builders have become very optimistic and the explanation is simple, sales are rising!\u00e2\u20ac\u009d<\/em><\/strong><\/p>\n

WHAT IT MEANS:<\/strong> \u00c2\u00a0There has been a disconnect between the attitude of residential developers and the new home sales and housing starts data.<\/em><\/strong>\u00c2\u00a0 I have argued frequently that builders don\u00e2\u20ac\u2122t smile unless they are selling something<\/em><\/strong> and right now, at least according to the National Association of Home Builders, they are giddy.\u00c2\u00a0 So housing sales had to have been rising and the August data finally point in that direction. \u00c2\u00a0Sales surged<\/em><\/strong>, but the level of demand is a bit suspect.\u00c2\u00a0 There was a 50% jump in the West to a sales level not seen since January 2008.<\/em><\/strong>\u00c2\u00a0 Meanwhile, in the rest of the country, demand is solid, if not strong, but nowhere near as exuberant as we saw in the West. \u00c2\u00a0Basically what I am saying is that there may be a bit of a seasonal factor issue involved in the West\u00e2\u20ac\u2122s increase, which may come out in the September numbers.\u00c2\u00a0 <\/em><\/strong>That said, it is likely that sales are rising and probably sharply.\u00c2\u00a0 Indeed, we still need the sales pace to increase about fifty percent before we can say the new home market is really strong.\u00c2\u00a0 Prices seem to be holding in, as the 8% year-over-year increase is similar to what we have seen much of the past couple of years<\/em><\/strong>.\u00c2\u00a0 The number of homes for sale rose but the number of months of supply came down sharply because of the jump in the sales pace.<\/p>\n

MARKETS AND FED POLICY IMPLICATIONS:<\/strong> \u00c2\u00a0Even if the extent of the increase in new home sales is somewhat overstated, it is likely that demand is rising pretty solidly.\u00c2\u00a0 We haven\u00e2\u20ac\u2122t seen this increase in sales show up in the starts numbers but that too is coming.<\/em><\/strong>\u00c2\u00a0 And when it does, it will be clear that the housing sector is doing just fine and can likely withstand the coming increases in mortgage rates.<\/em><\/strong>\u00c2\u00a0 The idea that a 5.5% or even a 6% 30-year fixed rate mortgage or a 4.5% to 5% 15-year rate would kill the market is, at least to me, bizarre.\u00c2\u00a0 Over the last twenty years, the 30-year rate has averaged 6.2%.\u00c2\u00a0 During the housing boom of 2003 through 2006, the rate averaged 6.0%.\u00c2\u00a0 We suffer from a false frame of reference.\u00c2\u00a0 Saying 6% is high may be true given the historically low levels that were created during the Great Recession and Disappointing Recovery, but they are clearly not normal rates.<\/em><\/strong>\u00c2\u00a0 Once it is accepted that the economy is in good shape and even the Fed figures that out, mortgage rates will rise, possibly quickly.\u00c2\u00a0 But that doesn\u00e2\u20ac\u2122t mean the housing market will tank. Fed Chair Yellen doesn\u00e2\u20ac\u2122t want to see another 100 basis point rise that occurred when tapering was announced, so she is going slowly on removing \u00e2\u20ac\u0153considerable time\u00e2\u20ac\u009d from its statement.\u00c2\u00a0 But that is just image.<\/em><\/strong>\u00c2\u00a0 The economic reality will drive Fed decisions and rate hikes are coming sometime during the first half of next.\u00c2\u00a0 Investors need to get their heads around the reality that higher rates are actually good because they represent a strong economy and solid growth supports improving demand in even interest sensitive sectors such as housing. <\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: Sales: +18%; West: +50%; Inventories: -14.3%: Prices (Year-over-Year): +8% IN A NUTSHELL: \u00c2\u00a0\u00c2\u00a0\u00e2\u20ac\u0153Home builders have become very optimistic and the explanation is simple, sales are rising!\u00e2\u20ac\u009d WHAT IT MEANS: \u00c2\u00a0There has been a disconnect between the attitude of residential developers and the new home sales and housing starts data.\u00c2\u00a0 I have argued frequently … Continue reading August New Home Sales<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,27],"tags":[],"class_list":["post-320","post","type-post","status-publish","format-standard","hentry","category-economic-indicators","category-new-home-sales"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/320","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=320"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/320\/revisions"}],"predecessor-version":[{"id":321,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/320\/revisions\/321"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=320"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=320"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=320"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}