According to data released by the U.S. Department of Housing and Urban Development, sales of newly constructed single-family homes spiked 11% in June to an annualized rate of 384,000 homes. Consensus had forecast seasonally adjusted sales of 352,000.
While the rate of improvement is consistent with our 2Q09 housing bottom call, the rate of sales is still 21% below the year ago levels. For reference, four years ago (during the height of the housing boom), the sales rate for June was 1,374,000, nearly three-and-a-half times higher than last month.
This report is impressive given what is going on with existing home sales and all of the foreclosure activity, which is sending home prices significantly lower.
I think most people would agree that Obama's $8,000 tax credit for first-time homebuyers is having a positive impact, but what will happen when it goes away in December?
Importantly, the June inventory of new homes dropped to 281,000, an 8.8 month supply at current rates of sale; in May, supply stood at 10.2 months. Most of the excess inventories tend to be concentrated in just a few markets, such as California, southern Florida, Las Vegas and Arizona.
As we look forward, "the construction-put-in-place” data next month will likely suggest that housing will be an additive to GDP versus being a drag as it has been more recently.