US new home sales missed expectations in July with a sharp 12.8% drop reported by the Commerce Department on Friday. 635,000 new homes were sold in July, down from June’s revised rate of 728,000 and below estimates of 647,000 units.
Key Takeaways
- New home sales came in below market expectations in July at 635,000 units, down 12.8% from June and less than the projected figure of 647,000 units.
- New home sales have risen just 4.1% annually, indicating ongoing weakness in the housing market despite the reduction in mortgage rates.
- The poor activity is spurred on by a shortage of available homes and labor, extending the housing shortage.
Home sales have dropped sharply from June figures, although these saw a major upward revision from 646,000 to 728,000 units.
The housing market has been performing poorly since 2018, which saw four interest rate hikes in total, impacting affordability. While the rate of interest on a 30-year fixed rate mortgage has dropped to 3.77% from its November peak of 4.94%, this has seemingly done little so far to stimulate the troubled market. Recently introduced rate cuts of 25 basis points may yet have an impact in the coming months, but for now the sluggish activity continues.
Jul ‘19 US total new single-family home sales were 635K (annualized). https://t.co/32qMXieI2y #Census pic.twitter.com/p6MhL8u35J
— U.S. Census Bureau (@uscensusbureau) August 23, 2019
The housing market is seeing weak activity in new and existing home sales as well as in the construction of new homes, although the latter a slight boost in July. Overall, the situation is worsened by land and labor shortages which have led to a tight inventory which fails to meet market demand in some categories. In the category of new homes, the inventory now stands at 337,000 which would be exhausted in 6.4 months at the current rate of sales, and this is considered to be a relatively balanced inventory.
The median sales price for new homes dropped to $312,800 in July, the highest level since April. However, this is still down 4.5% compared to July 2018.
Market Response
Gold prices ticked upward following the surprising home sales data. Spot gold last traded at $1,522.51/oz, up 1.68% with a high of $1,522.51/oz and a low of $1,493.84/oz. Spot gold is now pushing to beat daily highs, putting distance between the line of support at $1,500/oz which it passed earlier in today’s session.
Gold Price Chart
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