NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist
INDICATOR: June New Home Sales
KEY DATA: Sales: down 8.4%; Median Prices (Year-over-Year): down 3.2%
IN A NUTSHELL: “Home sales are bouncing around but the trend remains up.”
WHAT IT MEANS: I have been touting the housing market as the next leading light in the economy. Well, sometimes you have to take one step back to move two steps forward and that may have happened in June. New Home sales fell sharply. That was not expected. But as usual, the details may not really be as bad as they appear. First of all, sales of the previous three months were revised upward with the May numbers increased by 3.5% while the April numbers were boosted by nearly 4.5%. Those are pretty good sized increases and point to a market that is moving upward. So don’t be surprised if the June numbers also turn out to be a lot higher than initially estimated. Second, much of the fall off in sales came in the Northeast. If you believe the Census Bureau’s first round of guesses, new home purchases fell by a whopping and incomprehensible 60% in that part of the country. If you believe that, contact me immediately as I am selling shares in a bridge and a Broadway musical. Demand was down in the South as well while they rose sharply in the Midwest and more moderately in the West. Basically, the data can be volatile so let’s not get too worked up about one decline. Smoothing things out by looking at quarterly averages, second quarter new home sales were up by nearly three percent from the first quarter and nearly twenty percent from second quarter 2011. That’s solid improvement. Prices, however, did decline over the month and from last year. Sales at the upper end of the market eased and that hurt. Inventory is still minimal so that should keep prices from falling further if, as expected, sales rebound.
MARKETS AND FED POLICY IMPLICATIONS: In a world where the only data that matter are today’s data, this is not a good report. Indeed, most of us expected sales to have risen not fallen. Yet there is no reason to believe the market is weakening. The trend is still up and builders remain quite upbeat. Indeed, it is hard to believe that the market is turning downward when the Home Builders’ Confidence Index jumped in July to its highest level in over five years. Either developers are clueless or the data have yet to catch up with reality. I am on the side of the latter. Still, investors don’t like to be surprised, especially on the downside so this report cannot help build confidence in the economy. But it is earnings season and once again, what businesses did will probably dominate short term movements in the market. On Friday, second quarter GDP will be released and that should bring the discussion back to the economic numbers. Unfortunately, that report will likely be viewed more through a political lens than an economic one.
# # #
RE/MAX Connection Realtors is not a licensed financial advisor and is not providing any financial advice. You should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors only is providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
RE/MAX Connection Realtors, 1000 Lincoln Drive East, Suite Two, Marlton, NJ 08053 www.goconnectionnj.com
# # #