U.S. Data Pulse: April New Home Sales: Weak sales, still elevated inventories

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U.S. Data Pulse: April New Home Sales: Weak sales, still elevated inventories

UpdateM

New Home Sales

New home sales were 622k in April (down 6.2% m/m). The 3mma of new home sales is

now at 642k compared to 701k at the start of the year. New home sales can be volatile,

but there is clearly no sign of recent pickup. We don't expect much further decline in sales

given we think the sales are near the levels consistent with natural turnover. Other data

such as starts and homebuilder confidence remain soft but haven't shown new signs of

weakness. We are now tracking 1Q residential investment up 0.6% (q/q saar) versus 1.0%

before the print. Our housing strategists expect home sales to end the year relatively

unchanged, with new home sales down 1% y/y and existing sales flat. We likely need some

acceleration in new home sales before we can get a pickup in starts.

In April new home sales made up 14.6% of all single-family sales. The new home sales

share of sales has been elevated compared to the past couple decades due to the very low

volumes of existing home sales. New home sales fell m/m across all major regions except

the West.

Months of supply of new homes were 9.4 (sa) in April. The median price was up 2.2% y/y

in April while the average price was down 1.1%. We think the elevated supply will keep

starts subdued until some of the inventory can clear. So far this year, starts have been

rangebound.

The percent of new home sales that are already completed units remains elevated. During

the pandemic, homes under construction and not yet started made up larger shares of

sales, which we viewed as a sign of optimism about the housing market. That trend

reversed over the past three years, with homes not started now making up near the

lowest share of sales in decades.