New home sales remain a bright spot in a housing market that has cooled amid the surge in mortgage rates.
Sales of new homes increased by 4.4% in July to 714,000, according to Commerce Department data released on Wednesday. The rebound in new home sales has continued for more than a year with July’s data nearly 40% higher than the recent low in June last year.
It is clear that the mortgage lock-in effect has pushed sales from existing homes to new homes as homeowners, unwilling to give up their low mortgage payments, stay put.
Read more of RSM’s insights on the real estate industry.
At the same time, with housing in a chronic shortage, Americans are turning to what is available, which explains why the demand for new homes stayed strong in July despite rising mortgage rates.
The median prices of new homes rose by 4.8% on the month, but dropped by 8.7% from a year ago.
With housing starts and permits remaining solid in recent months, there is some room for sales of new homes to inch up further, but not very much in our estimation.
Revision to the payroll report
In separate report, March’s payroll data was revised downwardly by 300,000 according to the Bureau of Labor Statistics following its annual preliminary benchmark revision.
The revision saw total payroll employment fall by 0.2%, which we don’t view as a significant change. Job gains, after being revised, continued to average out at more than 250,000 for the first seven months of the year.
While the final revision will not be released until early next year, the downward revision does not change our view that the economy and the labor market remained robust in the first half of this year.
If anything, the revision should strengthen our case that the Federal Reserve should not raise interest rates anymore as the labor market was a bit less hot than expected.