This was a 15.7% gain in starts and permits, but almost all of those gains from June to July in starts and permits are in multifamily rental housing.
Then came word that existing home sales increased in July to their highest annual pace of the year, even if they were down 4.3% year-over-year.
Going into Monday’s report on new home sales, the media and analysts were predicting that new home sales would come in above the 430,000 annualized rate, which would have been a 6% gain.
But the July actual numbers of just 412,000 became the fifth time in the last six months that new home sales came in below expectations.
The disappointing July print of 412,000 is 2.4% is below the paltry June rate of 422,000, although it is 12.3% above the July 2013 rate of 367,000, which is when the housing slowdown kicked in after mortgage rates started rising.
The South was the sole region that saw an increase in new home sales, either month-over-month or year-over-year. The South rose 8.1% from June and 33% from July 2013.
The biggest decline by region was in the northeast, which has just 18,000 annualized new home sales, down 31% from June and down 44% from July 2013.
The Midwest declined 8.8% and the West fell 15.2%.
“Housing activity remains modest with continued declines in new home purchases juxtaposed with several months of improvement in existing home sales. Underlying the month-to-month volatility remains the inadequate momentum in the labor market; consumers remain restrained by lackluster income and job creation,” said Sterne Agee chief economist Lindsey Piegza.
Others in the industry appeared to concur.
“After strong housing starts and existing home sales numbers, the disappointing New Home Sales report puts a damper on this positive month for the housing market,” said Quicken Loans vice president Bill Banfield. “The silver lining appears to be the increase in home inventory, which has consistently held the market back.”
One industry commenter had a more positive outlook on the market despite the numbers, saying that the market could still make a comeback based on average mortgage rates being at a 2014 low.
“Contrary to market fears, mortgage rates have been falling so far this year, with the latest conforming 30-year fixed rate down to 4.24% from 4.57% a year ago, while the 15-year fixed-rate mortgage has fallen to a low of 3.39%,” said Ron D’Vari, CEO of NewOak.
Anthony Sanders, distinguished professor of real estate finance at George Mason University, said on his blog Confounded Interest that the direction of the housing industry can be seen in the direction of median household incomes, labor force participation and wage growth --- all over which are down.
As promised, here’s that one chart that shows why HousingWire never finds reports like Monday’s new home sales “unexpected,” courtesy the professor.
“If I throw in mortgage purchase applications (blue line), you can see that both new home sales and mortgage purchase applications remain in ‘Death Valley,’” Sanders said.
Click to enlarge.
Bonus: Take a look at how the median sales price of new houses sold in July 2014 was $269,800; the average sales price was $339,100 – down 3.7% and the biggest drop since May 2013.
Zero Hedge finds this one of the most troubling aspects in today’s new home sales report.
“(T)he months supply of new homes rose to 6.0, the highest since September 2011, as a result of 121K homes under construction the most in years, while 37K new homes have not even been started: also the highest number in years as builders seem to have front-run the ‘recovery’ once again.
Click to enlarge.
“All this suggests that there has been an inflection point in the supply which can not be absorbed by the market, which also means median prices are likely to drop in the coming months,” ZeroHedge notes.
Despite this, much of the housing industry seemed to shake off the bad news, with the bulk of stocks in the HW 30 – HousingWire’s proprietary index of public companies that drive real estate – were up, and the HW 30 was up about 10 points in early afternoon trading.
On Tuesday the industry gets home prices, and Thursday comes existing home sales.
Take note of who finds what “unexpected.”
Bonus Bonus: A chart from HousingWire favorite AMC Lending’s Logan Mohtashami pointed to similar problems -- and made the point that no amount of housing optimism and shuffle stepping can repeal the basic laws of economics -- not for long anyway.