US: August New Home Sales edge lower - Nomura

Analysts at Nomura explained that August new home sales decreased to an annual pace of 560k, down 3.4% m-o-m from an upwardly-revised 580k in July. 

Key Quotes:

"August sales were mostly in line with our expectations but below market expectations (Nomura: -1.1% to 565k, Consensus: 2.5% to 585k). Regionally, sales in the South posted a sharp 4.7% decline while sales in the West also fell slightly. Sales in the Northeast and Midwest were mostly unchanged.

Hurricane Harvey likely affected the Census Bureau’s sales estimates for August and prior months in the South due to the impact on actual sales activities as well as on data collection. Together with Hurricane Irma, Harvey will likely have a lasting impact on September estimates while preceding months will also be revised. Most of new single-family residential construction starts and those for sales derive from permits data collected in the Survey of Construction. The Census Bureau reported that the sales status of only about 65% of the sampled single-family permits in Texas and Florida counties in the FEMA Individual Assistance Disaster Declarations were collected. For non-responses, the Census Bureau assumed that there was no change and counted the units in their previous status as for sale. Further, newly issued single‐family permits were counted as for sale if the sales status could not be determined. This data treatment was positive to new home inventories but negative to sales, which pushed up the months’ supply of new homes (the ratio of inventories to sales).

The months of supply indicator rose to 6.1 months, from 5.7, as the sales pace slowed, but inventories increased in August. The supply of new homes for sale continued to rise modestly, while still below the level before the global financial crisis. Though recovery work after the recent storms could boost construction modestly in the South, shortages of skilled labor and of developable lots could continue to constrain inventory growth. Although consumer demand remains strong, steadily rising prices may weigh on demand in the long run. The share of single-family homes sold for under $300k accounted for only 50% of total sales in August, a proportion that has been declining for some time.

GDP tracking update: August new home sales were mostly in line with our expectations. An upward revision to July was slightly positive. After rounding, our Q3 real GDP tracking estimate remains unchanged at 2.0% q-o-q saar."