Whiplash
No sooner were the words spoken last week about the excellent June existing home sales numbers–an eight year high along with a new price peak–than the Census Bureau gave us whiplash. New home sales for the same period plunged 6.8% to an annual rate of 482,000 units.
That wasn’t the worst of it. The June decline was from a revised May number of 517,000 not 546,000 as first estimated. That erased the April-May gains even after a second revision to April data lopped 11,000 off that previously reported rate. The end result of all of this math? June had the slowest pace of new home sales since last November.
Sales were higher than a year earlier and inventories increased to a 5.4 month supply from 4.7 months in both April and May. Of course that absorption rate is predicated on slower sales so even the silver lining was a little tarnished.
Pending sales were also disappointing but the 1.8% dip from May’s nine year high is hardly cause for alarm. Plus the Pending Home Sales Index was still higher than early 2015 levels.
Case-Shiller, CoreLogic, and Black Knight Financial Services all released their May home price figures this week; all showed home prices rising, but at a slow and steady pace. Estimates of annual gains ranged from 4.4 to 6.3%, higher than last year but about half the rate of the 2013 increases that spooked some economists.
The strong dollar, good news in lots of ways, may have a downside for real estate. While home sales were up by 9% in the first four months of this year compared to last, sales to foreign buyers have dropped by 19%. CoreLogic economist Frank Nothaft says blame it on the exchange rate.
The dollar which has gained 10% relative to the British pound, 13% against the Canadian dollar and 26% on the euro, is causing sticker shock Nothaft says. In addition to their currencies buying less, these buyers are finding higher prices in those markets they gravitate toward large cities on both coasts. A Canadian seeking to buy in the Miami area. for example, will find the 7-8% home appreciation rate coupled with a stronger dollar–increasing his purchase cost by 20 to 25% over a year ago.
In other news, durable goods and consumer sentiment softened but the Fed told America it gets at least two more months of low interest rates. It was neither the best of weeks nor the worst and next week the news will probably whip us in yet another direction.