New Homes Sales Show ‘Improving’ Housing Market; Prices Up Slightly

New single-family home sales improved in July, HUD and the Census Bureau reported yesterday, with tightening inventories sparking a jump in median and average home prices.

In separate reports, the Standard & Poor’s/Case-Shiller Home Price Indices and the Federal Housing Finance Agency House Price Index both reported slight increases in home prices over the summer.
HUD/Census said sales of new single-family houses in July came in at a seasonally adjusted annual rate of 507,000, a 5.4 percent improvement from June’s revised rate of 481,000 and 25.8 percent higher than a year ago (403,000).

Regionally, sales improved except in the Midwest, where they fell by 6.9 percent in July to 54,000 units, seasonally adjusted, from 58,000 in June; sales were unchanged from a year ago. In the Northeast sales rose by 23.1 percent to 32,000 units from June’s 26,000 and improved by 39.1 percent from a year ago (23,000). In the South, sales rose by 5.8 percent to 294,000 units from June’s revised 278,000 and rose by nearly 29 percent from a year ago (228,000). In the West, sales rose by 1.9 percent to 218,000 units from June’s revised 214,000 and improved by 6.9 percent from a year ago (204,000).

The report said the median sales price of new houses sold in July rose to $285,900 from $277,500 in June; the average sales price jumped to $361,600 from $319,600 in June. The seasonally adjusted estimate of new houses for sale at the end of July rose to 218,000, representing a supply of 5.2 months at the current sales rate, from 5.3 months in June.

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said the July numbers suggest the housing market is still improving, noting new home sales have risen for three of the past four months.
“The level of inventories remains a key barometer for new home sales,” Vitner said. “Inventories edged higher in July, reaching the highest level in more than five years and marking the fifth consecutive month of gains. Since the beginning of the year, inventories are up almost 5 percent.”

Vitner noted sales of new homes where construction has “not started” yet jumped by 19.2 percent in July. “That big jump suggests that home builders have solid momentum going into the second half of the year,” he said.

Meanwhile, the S&P/Case-Shiller U.S. National Home Price Index recorded a slightly higher year-over-year gain with a 4.5 percent annual increase in June compared to 4.4 percent in May. The 10-City Composite had marginally lower year-over-year gains, with an increase of 4.6 percent year-over-year. The 20-City Composite year-over-year pace was virtually unchanged from last month, rising 5.0 percent year-over-year. 

The report said Denver, San Francisco and Dallas reported the highest year-over-year gains among the 20 cities with price increases of 10.2 percent, 9.5 percent and 8.2 percent, respectively. On a month over month basis, S&P said the national index and 20-City Composite both reported gains of 1.0 percent; the 10-City Composite posted a gain of 0.9 percent. After seasonal adjustment, the National index posted a gain of 0.1 percent while the 10-City and 20-City Composites were both down 0.1 percent month-over-month. All 20 cities reported increases in June before seasonal adjustment; after seasonal adjustment, nine were down, nine were up, and two were unchanged. The report said average home prices for MSAs within the 10-City and 20-City Composites are back to their winter 2005 levels. Measured from their June/July 2006 peaks, the peak-to-current decline for both Composites is 12-14 percent. Since the March 2012 lows, the 10-City and 20-City Composites have recovered 33.8 percent and 34.9 percent, respectively.

“The missing piece in the housing picture has been housing starts and sales. These have changed for the better in the last few months, said David Blitzer, managing director and chairman of the Index Committee with S&P Dow Jones Indices. “Sales of new homes are also trending higher. These data point to a stronger housing sector to support the economy. Two possible clouds on the horizon are a possible Fed rate increase and volatility in the stock market. A one quarter-point increase in the Fed funds rate won’t derail housing.”

“Home price appreciation in the U.S. has been moderating for much of this year, as investors and buyers have stepped back in the market,” Vitner said.

Also yesterday, FHFA said U.S. home prices rose by 1.2 percent in the second quarter, the 16th consecutive quarter of recorded increases. The seasonally adjusted monthly index for June rose by 0.2 percent from May. House prices rose by 5.4 percent year over year. 

The HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac.   

“Home price growth in the second quarter once again far exceeded the pace of overall inflation, even as mortgage rates drifted upwards,” said FHFA Principal Economist Andrew Leventis. “Although too early to tell whether it’s a sign of a slowdown, the monthly appreciation rate in June was more modest than we have seen in a while.”

FHFA said home prices rose in every state year over year, with the top five areas in annual appreciation Colorado (10.6 percent), Nevada (10.5 percent), Florida (9.7 percent), Hawaii (9.5 percent) and Washington (8.8 percent).
Among the 100 most-populated metropolitan areas in the U.S., four-quarter price increases were greatest in San Francisco, where prices increased by 18.3 percent.  Prices were weakest in the Allentown-Bethlehem, Pa., where they fell -1.1 percent. Of the nine census divisions, the South Atlantic division experienced the strongest increase in the second quarter, posting a 1.7 percent quarterly increase and a 6.1 percent increase since last year. House price appreciation was weakest in the Middle Atlantic division, where prices were flat in the second quarter.