Sales of new single-family houses plummeted in June to an annualized rate of 406,000, at least 20% below most analyst estimates.
It was the biggest miss for new home sales in a year, and brings new home sales down to a level not see since December 2012. June's sales fell 8.1%, the largest drop since July 2013.
New home sales for June came in at a seasonally adjusted annual rate of 406,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.
June’s new home sales were 11.5% below the June 2013 estimate of 459,000.
Making matters much worse, May’s annual rate was revised downward from 504,000 in May to 442,000, a huge downward revision that came after the original incorrect 19% surge was celebrated in the mainstream headlines as a sign of the housing recovery picking up.
There was also a downward revision to March's numbers, from 410,000 to 408,000, and in April's numbers, from 425,000 to 408,000.
“After months of strong sales, more than offsetting the declines in February and March, new home sales activity has slowed dramatically in June,” said Lindsey Piegza, chief economist at Sterne Agee. “Temporary activity thanks to improved weather and pent-up demand appears to have been quickly satisfied. Going forward, new demand will be dependent on the consumers' ability to afford a new home. However, with house price appreciation outpacing income growth, many potential homebuyers are already being priced out of the market.”
Notably, it also comes one week after the National Association of Home Builders survey showed that builder confidence was at a six-month high
Many said that May’s original surge was a sign of the housing market’s strength – the industry should watch which news outlets address this issue.
HousingWire addressed this as 2014 being the year that housing failed to launch.
June’s big new home miss was 8.1% below the downward revised May rate. No mention was made if the winter cold had any affect on the numbers.
Tom Showalter, Chief Analytics Officer at Digital Risk, said he saw good news and bad news, but more bad news.
“What I am seeing is a long term upward trend (increases in housing prices, housing starts, home sales) from 2007 to today; that’s the good news,” Showalter said. “Lately, I am seeing volatility in the numbers, which can suggest many things. What I think it means is that the fundamentals of the economy are starting to impact the housing market.
“GDP growth since Meltdown has averaged less than 2% – this not enough to replace jobs or generate long term confidence. On top of underwhelming GDP, the decline in the median wage is persistent, a serious long-term issue. The decline in median income suggests very low year over year changes in wages per worker,” he said.
“Juxtaposed to the anemic growth in wages is a robust growth in housing prices. What recent data suggests is that unless there is some very specific micro economic event happening in any given MSA, median income growth (decline), complemented by anemic growth in wages per worker strongly suggests that the era of housing price appreciation may be short lived.”
The bad news for new home sales comes just two days after existing home sales for June were reported as down 2.3% year-over-year.
The median sales price of new houses sold in June 2014 was $273,500; the average sales price was $331,400.
The seasonally adjusted estimate of new houses for sale at the end of June was 197,000. This represents a supply of 5.8 months at the current sales rate.