US new home sales tepid numbers disappoint consumer sentiments but close watch on durable goods orders

The US housing market was one of the vivid spots of activity in Q2. As we emphasize in US Housing, a lot of the Q1 weakness in the housing market was likely to be temporary and weather-induced. Incoming data support our view of a Q2 rebound. Housing starts jumped 9.8% MoM to 1.174 mn units in June following a surge in permits in May but new home sales numbers were shrunk to 482K from previous 517K which is a way below forecasts at 543K.

We project housing starts to respond and forecast starts of 1.27mn by the end of 2015 and 1.44mn by the end of 2016. The factors fortifying our outlook for housing activity also support our outlook for home price appreciation.

We expect the YoY pace of home price appreciation to accelerate further this year and to then to slow slightly in 2016 as the supply of housing has more time to adjust to an improved demand backdrop and consumer outlook.

But today's core consumer durable orders MoM are forecasted to rise at 0.4% which is above from previous flash at 0.0%. It measures any adjustments in the total value of new purchase orders placed with manufacturers for durable goods, excluding transportation item.