Author: David Templeton, CFA, Principal and Portfolio Manager
The Census Bureau's report for June new home sales were reported at an annual rate of 676,000. This is the lowest level since April 2020 sales of 582,000. Towards the end of last year new home sales were running at an annual rate of nearly 1,000,000 homes.
As is often said, high prices tend to fix high prices and possibly this is now occurring with the housing market. After the median selling price of new homes sold peaked at over $380,000 in May, maybe the June average selling price of $361,800 is reflective of further pricing relief over the near term.
The below chart does show the supply of available new homes at 353,000 has been increasing since the October 2020 low of only 284,000. The second chart below shows the months supply of new homes at 6.3 months. This appears to be a near normal level outside the oversupply created in the housing bubble of 2008/2009.
In conclusion, much has been written about the early spike in lumber prices that are now down over 60% from their peak in May. Some of the decline is due to supply catching up with demand: however, demand seems to have cooled too if building permit data for new homes is any indication. Building permits for new housing in June are down 5.3% compared to May and down 15% from January's peak. The recent weaker housing data may be a sign that prices in other areas will come down; hence, supportive of the transitory view on inflation.
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