US new home sales grow strongly in June; housing likely to remain firm in medium term

US new home sales grew strongly in the month of June. New home sales rose 3.5 percent month-on-month to 592,000 in June, as compared with consensus expectations of 560,000. Earlier months’ data was upwardly revised by 22,000 on net, predominantly due to upward revisions in data of May and March; however, growth pace for April was significantly revised down. Within the revised data, the 6 percent month-on-month drop in May was totally revised away.

On a year-on-year basis, new home sales grew 25 percent in June. June’s data affirms the significant strength in the housing market in the past few months. In spite of certain weakness in prices that was reported, US housing market continues to be healthy, said Barclays in a research note.

“We expect housing to continue to firm, on average, over the medium term, with a buoyant household sector supporting both prices and volumes”, added Barclays.

Sharp increase in sales in Midwest and rise in the West mainly drove the overall sales in June. New home sales in the South were flat, whereas in the Northeast it decelerated slightly. After the increase in sales, months’ supply dropped to 4.9 from 5.1. This is the lowest reading since the beginning of 2015.

The June report also recorded strong price growth. Median prices rose 6.2 percent month-on-month to USD 307,000. Average prices were up at a more moderate rate of 1.9 percent month-on-month to USD 358,000. This suggested that softness is in line with the weakness seen in house prices that was reported yesterday, in New York and San Francisco, noted Barclays. On a seasonally adjusted basis, the median number of months for sale dropped to 3.4 months.

“The revised path of new home sales through May suggests a bit less brokers’ commissions than we had previously expected. On net, our GDP tracking estimate ticked lower after rounding to 2.3%”, said Barclays.