US Macro Updates

Key takeaway: New Home Sales had been rising through the first half of 2023. However, with mortgage rates firmly above 7.0%, these high interest rates are making a significant dent in new home buying demand. Over the past few months, we have seen weakness return to the US new home construction industry. Home Builders sentiment has fallen continuously for the past few months. Sales of new single family houses has also plateaued over the past few months. September had recorded a sharp jump of 12.3% to a SA annual rate of 759K units. However, October registered a sharp drop. Sales of new single family houses in October were at a SA annual rate of 679K. Moreover, even September was revised lower to 719K. While new home sales have levelled off in the past few months, it is also important to remember that 10 year yields have come off sharply in November. Hence we might likely see a jump back in NHS in the subsequent couple of months. The median new home price fell to $409K. While this is lower than the $497K high of October 2022, it is still significantly above pre-pandemic levels of around $320K.   

• New Home Sales increased to a SA annual rate of 679K homes in Oct (Expectations : 721K).
• Median New Single Family Home Price Chart

25th Oct 2023

Key takeaway: New Home Sales had been rising through the first half of 2023. However, with mortgage rates firmly above 7.0%, these high interest rates are making a significant dent in new home buying demand. Over the past few weeks or couple of months, we have seen weakness return to the US new home construction industry. Home Builders sentiment has fallen for 3 months in a row. However, New Home Sales for September recorded a sharp jump of 12.3% to a SA annual rate of 759K units. This is the highest level seen since February 2022. Given the other recent negative data points it will be key to watch if this level of home sales is sustained in the coming months. The other key point to note is that builders have had to offer steeper discounts to incentivize new buyers to come onboard. The median new home price fell to $418K – almost 12% below the level last year.  

• New Home Sales increased to a SA annual rate of 759K homes in Sep (Expectations : 680K).

26th Sep 2023

Key takeaway: New Home Sales had been rising through the first half of 2023. However, with mortgage rates firmly above 7.0%, these high interest rates are making a significant dent in new home buying demand. Over the past few weeks or couple of months, we have seen weakness return to the US new home construction industry. Home Builders sentiment has fallen for 3 months in a row. And now, the latest New Home Sales release shows NHS fell a whopping 8% from last month to a SA annualized rate of 675K in August. While new home sales statistics tend to be volatile and are often revised, the latest release read together with other data points in the US residential sector, like home builder confidence, point to a peak in the mini rally that we have seen in 2023. The median sales price of a new home edged lower to $430,300 in August. Despite the decline, that’s still well above pre-pandemic levels. Lastly, inventory also continued to remain tight at 7.8 months of supply.  

• New Home Sales decreased to a SA annual rate of 675K homes in Aug (Expectations : 700K).

23rd Aug 2023

Key takeaway: New Home Sales have been ripping higher since the low levels reached in mid 2022. New Home Sales in July climbed 4.4% from the previous month to a SA annualized rate of 714K units. After a number of months of continuous increases, the new home sales number had moderated a bit in June. However, barring that exception, NHS climbed back up again in July. The July New Home Sales figure is a whopping 32% above the same month last year. Little surprise then that the home builders confidence index continues to be substantially higher than last year. The second interesting point to note in the latest NHS release was the sharp increase in median sales price from $416K to $437K. Lastly, the SA estimate of new houses for sale at the end of June was 437K which represents a supply of 7.3 months at the current sales rate (which once again indicates fairly tight supply even in the new homes market).  

• New Home Sales increased to a SA annual rate of 714K homes in Jul (Expectations : 705K).

26th Jul 2023

Key takeaway: There were a few points to note about the latest June New Home Sales report from the Census Bureau. Firstly, New Home Sales have been ripping higher since the low levels reached in mid 2022. The last few months had especially seen a substantial rise in new home sales. That trend moderated a bit in June. New Home Sales for June declined 2.5% m-o-m on a SA annualized rate basis to 697K. Moreover the May figure was also revised down substantially from 763K to 715K. Nonetheless, even with the revised numbers, the June New Home Sales figure is a whopping 24% above the same month last year. Little surprise then that the home builders confidence index is substantially higher than last year. Secondly, similar to the last month, sales of new homes that have not started construction yet, have been growing faster than those under construction or completed homes. The median sales price has now been holding steady in 2023 but still lower than the high prices seen in 2021 and 2022 ($415K in June 2023). The SA estimate of new houses for sale at the end of June was 432K which represents a supply of 7.4 months at the current sales rate (which once again indicates fairly tight supply even in the new homes market).  

• New Home Sales decreased to a SA annual rate of 697K homes in Jun (Expectations : 725K).

27th Jun 2023

Key takeaway: New Home Sales jumped a massive 12.2% m-o-m in May to a SA annualized rate of 763K. That is a full 230K above the low hit is 2H 2022. The shortage of sellers in the existing homes market continues to boost sales numbers in the new construction space. It is little surprise that the New Home Builders confidence index (NAHB Index) is above the key level of 50 and home builder stocks are on an absolute rip higher. In fact another key point to note in the latest New Home Sales report was that a large proportion of the increase came from homes that have not started construction yet. The median sales price though has continued to moderate compared to the massive price increases seen in 2021 and 2022 ($416K in May). The SA estimate of new houses for sale at the end of May was 428K which represents a supply of 6.7 months at the current sales rate (which once again indicated fairly tight supply even in the new homes market).  

• New Home Sales increased to a seasonally adjusted annual rate of 763K homes in May (Expectations – 675K).

23 May 2023

Key takeaway: In a continuation of the upward trend that started since Sep/Oct of last year, New Home Sales grew 4.1% in April to a SA annual rate of 683K units. However, like we have repeatedly mentioned, this data point tends to be quite volatile. March New Home Sales were revised downward from the previous estimate of 683K to a revised estimate of 656K. Nonetheless, it does not change the key takeaway that new home sales are having a strong run since the start of 2023. Sentiment amongst the home builders remains strong as sellers withdraw from the existing home sales market driving resilient new home buyers towards new constructions. The median sales price though has continued to moderate compared to the massive price increases seen in 2021 and 2022 ($420K in April). The SA estimate of new houses for sale at the end of April was 433K which represents a supply of 7.6 months at the current sales rate.  

• New Home Sales increased to a seasonally adjusted annual rate of 683K homes in Apr (Expectations – 663K).

25th Apr 2023

Key takeaway: New Home Sales data tends to be very volatile and the 90% confidence level ranges for this data point tend to be wide. Nonetheless it is unmistakable that new home sales have been on an upward trend since Sep/Oct of last year. New Home Sales had posted a monthly gain for the fifth time in a row in Feb 2023 (data released in March). However, that data point was revised lower from 640K to 623K. For March though, NHS were once again up on a m-o-m basis, increasing 9.6% to a seasonally adjusted annual rate of 683K from 623K in Feb. The overall rise in the residential real estate sector activity can also be evidenced through other data points. NAHB home builder confidence index similarly has also increased 4 months in a row. Home builder stocks have been outperforming even the broader market YTD. Even the S&P Case Shiller Home Price Indices released earlier today showed a monthly gain for residential real estate nationally as well as across most cities tracked through the Index. This solid rise in residential real estate activity and accompanying house price increases (or at least the pause in downward prices) will be a concern from an inflation perspective for the Fed. . 

Supply of new homes fell to 7.6 months which was lower than the 8-9 months supply seen at the start of the year. And the median home price increased to $449.8K    

• New Home Sales increased to a seasonally adjusted annual rate of 683K homes in Mar (Expectations – 630K).

23rd Mar 2023

Key takeaway: New Home Sales data tends to be very volatile and the 90% confidence level ranges for this data tend to be wide. Nonetheless it is unmistakable that new home sales have been on an upward trend since Sep/Oct of last year. For a fifth month in a row now, New Home Sales have posted a monthly gain. NHS increased in February to a seasonally adjusted annual rate of 640K from 633K in January. Nonetheless, it is also key to note that January data was revised down from 670K to 633K. The overall rise in the real estate sector activity can also be evidenced through other data points. Existing Home Sales for February have also posted a sizeable gain from January. NAHB home builder confidence index similarly has also increased 3 months in a row. Home builder stocks have been outperforming even the broader market YTD. While the increase in mortgage rates seen in the 2nd half of February might have some cooling effect seen in subsequent releases, the solid rise in residential real estate activity will be a concern from an inflation perspective for the Fed. . 

Supply of new homes fell to 8.2 months. And the median home price increased to $438.2K    

• New Home Sales increased to a seasonally adjusted annual rate of 640K homes in Feb (Expectations – 650K).

24th Feb 2023

Key takeaway: New Home Sales data tends to be very volatile and the 90% confidence level ranges for this data tend to be wide. Nonetheless it is unmistakable that new home sales have been on an upward trend since Sep/Oct of last year. For a fourth month in a row, New Home Sales have posted a monthly gain. NHS increased in January to a seasonally adjusted annual rate of 670K from 625K in December. Just to recap – even mortgage rates had reduced to close to 6% in January from over 7% end of last year. As existing home owners increasingly reduce listings in the real estate market given sky high mortgage rates, resulting in a relatively low inventory of existing homes, it is little surprise that there is more activity in the new homes market. While January NHS increased again, the last 2 weeks of February have once again been disappointing for real estate data with mortgage rates back up above 6.5%, new residential construction falling and continued decline in Existing Home Sales. 

Supply of new homes fell to 7.9 months. And the median home price decreased to $427.5K (the first fall on a y-o-y basis since August 2020.)    

• New Home Sales increased to a seasonally adjusted annual rate of 670K homes in Jan (Expectations – 620K).

26th Jan 2023

Key takeaway: For a third month in a row, New Home Sales have posted a monthly gain. NHS increased in December to a seasonally adjusted annual rate of 616K from 602K in November. A point to remember is that this number indeed tends to be very volatile. For instance, the November figure was revised lower from 640K to 602K. Nonetheless, similar to other real estate indicators like mortgage rates, existing home sales, NAHB index data, pending home sales, NHS has seen a bit of an uptick (or at least a pause to the rapid deterioration that was a feature for much of the last year). While private measures of the real estate market have been pointing to a price decline both in house prices and rent, other indicators like shelter inflation in the CPI and Census data have yet to show meaningful, broad-based, across-the-country price declines. While the NHS indicator might not mean much on a standalone basis, collectively the overall easing of conditions in the economy will keep the Fed on its toes for inflation alert! 

Supply of new homes remained around the same level – at 9.0 months. And the median home price also remained at around the same level at $442K.    

• New Home Sales increased to a seasonally adjusted annual rate of 616K homes in Dec (Expectations – 617K).

23rd Dec 2022

Key takeaway: For a second month in a row, New Home Sales have surprised to the upside. NHS increased in November to a seasonally adjusted annual rate of 640K from 605K in October. While this number indeed tends to be very volatile, a headline increase is not good news in an environment where the Fed is desperately looking for signs of inflation easing. It is key to note though that the Census Bureau does not make adjustments to this headline number to account for cancellations of home purchases. And cancellations are significantly higher compared to the same period last year. By some accounts, almost one in two new home sales contracts are being cancelled! Secondly, past months data has consistently been revised lower. 

Supply of new homes remained around the same level – at 8.6 months. And the median home price also remained at around the same level at $471K.    

• New Home Sales increased to a seasonally adjusted annual rate of 640K homes in Nov (Expectations – 600K).

23rd Nov 2022

Just as further background, New Home Sales, on a m-o-m basis increased in August, fell back in September and increased back again in October. Now, new home sales tends to be a volatile number. Also, new home sales is roughly only 10% of the US home market. Existing Home Sales, which is the balance 90% of the market, and Pending Home Sales, which is a more timely indicator, are more important indicators to assess the housing market. Nevertheless, given the overall stubborn inflationary environment of the past 12 months, a strong New Home Sales print is negative news overall. Also remember mortgage rates were the highest in October! To make things worse, median sales price actually increased m-o-m, from US$455,700 to US$493,000. Admittedly, this was because of a larger proportion of homes sold in the higher bucket of $500K to $749K. Nonetheless, visually an increasing median sales price is simply unacceptable given the lag effects on inflation. New home inventory continues to be about the highest since the 2008 crisis period – both from a total number perspective (470K) as well as number of months supply (8.9 months). Given a deteriorating housing market and the large contribution that the housing sector plays in the US economy, it is a matter of time before it starts to reflect in unemployment and job creation / opening data.    

• New Home Sales increased to a seasonally adjusted annual rate of 632K homes in Oct (Expectations – 570K).

 

26th Oct 2022

After an unexpected increase in August, New Home Sales were back down in September – falling to an annualised rate of 603K from 677K in August (minus 10.9%). Mortgage rates had taken a breather in August and were back up in September. In fact rates have spiked even higher in October – an indication of things to come. New home inventory is now the highest since the 2008 crisis period – both from a total number perspective (462K) as well as number of months supply (9.2 months). Given a deteriorating housing market and the large contribution that the housing sector plays in the US economy, it is a matter of time before it starts to reflect in unemployment and job creation / opening data. However, the most important data point in this NHS release was the increase in median home price from $435K in Aug to $470K in September. Remember shelter is the most important component of CPI!   

• New Home Sales decreased to a seasonally adjusted annual rate of 603K homes in Sep (Expectations – 585K).

27th Sep 2022

New home sales unexpectedly surged in August to an annualised rate of 685K. By way of comparison, consensus estimate was 500K! But this does not indicate a bullish housing market at all. In fact, median sales price fell from $466K in July to $436K in August – a drop of about 6% ! Home builders are now more willing to drop prices to clear inventory given the lower demand resulting from higher mortgage rates. In fact the S&P Global Case Shiller Housing Index released today showed a fall of 0.4% m-o-m in July – the first such monthly decline since 2012!  

• New Home Sales surged to a seasonally adjusted annual rate of 686K homes in Aug (Expectations – 500K).

23rd Aug 2022

July new home sales have absolutely tanked as high mortgage rates take their toll! Annualized new home sales now stands at 511K – a multi-year low. Approx. 13% lower on a m-o-m basis. But once again key to remember that this data point tends to be notoriously volatile. The average relative standard errors are significantly large. Nonetheless, the sharp slowdown in the housing market is unmistakable. 

• New Home Sales declined to a seasonally adjusted annual rate of 511K homes in July.

26th Jul 2022

After an unexpected pick up in May, the downward trend of new home sales resumed again in June. An annualized rate of 590K homes, new home sales are close to a 5 year low. The key point really to watch here is how low does it go? 

• New Home Sales declined to a seasonally adjusted annual rate of 590K homes in June.

24th Jun 2022

Sales of new homes jumped unexpectedly 10% in May reversing a downward trend since the last 4 months. Annualized rate of 696K homes. The key point to remember is that this data tends to be notoriously volatile. The average relative standard errors are significantly large. 

• New Home Sales increased to a seasonally adjusted annual rate of 696K homes in May.