New home sales for September were reported at 959,000 on a seasonally adjusted annual rate basis (SAAR). Sales for the previous three months were revised down, combined.
This was below consensus expectations, but was still the third highest sales rate since 2006 (behind July and August). Clearly low mortgages rates, low existing home supply, and low sales in March and April (due to the pandemic) have led to a strong increase in sales. Favorable demographics (something I wrote about many times over the last decade) and a surging stock market have probably helped new home sales too.
This graph shows new home sales for 2019 and 2020 by month (Seasonally Adjusted Annual Rate).
New home sales were up 32.1% year-over-year (YoY) in August. Year-to-date (YTD) sales are up 16.9%.
And on inventory: since new home sales are reported when the contract is signed – even if the home hasn’t been started – new home sales are not limited by inventory (except if no lots are available). Inventory for new home sales is important in that it means there will be more housing starts if inventory is low (like right now) – and fewer starts if inventory is too high (not now).
Usually New Home Sales is a great leading indicator for the economy, however, currently the course of the economy will be determined by the course of the virus, and New Home Sales tell us nothing about the future of the pandemic. Without the pandemic, I’d obviously be very positive about this report.