New home sales were suprisingly sluggish in June

Summary

Softer Home Sales, But Not As Weak As They Appear

We had a sense that new home sales would disappoint in June and were expecting a number well below the 800,000-unit annual rate consensus. The actual print was even lower, with new home sales dropping 6.6% in June to a 676,000-unit pace, and sales were revised down by a cumulative 90,000 units during the prior three months. Since peaking at a 993,000-unit annual rate in January, new home sales have lost considerable momentum. The drop in sales reflects sticker shock on the part of buyers, some shifting in buyers' attention toward services spending and a high degree of restraint on the part of home builders. The latter is the most important. Many home builders are limiting sales in new communities due to ongoing supply shortages of building materials, HVAC equipment and appliances. The impact of these sales caps are exacerbated by the seasonal adjustment process. Supply chain woes are not only the underlying thread behind the home sales shortfall but are also likely chipping away a few percentage points from economic growth elsewhere.

Download the full report