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Home sales data are sending a mixed message. It isn't clear if things are getting better or if they are getting worse. Existing home sales for June were disappointing, but new home sales were extremely strong.

Existing home sales in June, on a seasonally adjusted annual basis, were 5.08 million units. That was well off the 5.28 million unit consensus expectation and it was also down 1.2% from May's level, which itself was adjusted lower to 5.14 million units from the initial estimate of 5.18 million units. These figures include single-family homes as well as townhouses, condominiums, and coops. The bulk of the figures, however, consist of single-family homes, which dropped to 4.50 million units in June from 4.55 million units in May.

Ironically, the recent rise in mortgage rates was the reason why analysts were hoping for stronger results. After all, rising rates often provide the catalyst to convince potential buyers to take action. According to Freddie Mac, the monthly average commitment rate for 30-year fixed-rate mortgages climbed to 4.07% in June from 3.54% in May and 3.41% in January. That should have been more than enough to convince even the most stubborn fence-sitters to jump. Many analysts are now worried that either rates have climbed too high or demand for homes is weaker than they thought. The fear is that existing home sales may soon fall back to lower levels.

The optimists, however, got some relief when new home sales figures were released. On a seasonally adjusted annual basis, new home sales in June jumped 8.2% from May to 497,000 units in June. This was also much better than the consensus expectation of 483,000 units, and it was the highest level new home sales have reached since May 2008.

As for prices and inventories, again, we have a mixed bag. On a year-over-year basis, prices for both existing homes and new homes are up strongly and inventories for both are much tighter. But things aren't so clear month over month. Median existing home prices were up 5.5% from May to June, but inventories climbed higher. Perhaps this reflects the shadow supply we've been worried about. In other words, as housing prices begin to rise, homeowners who have been wanting to sell for some time finally decide to list their houses. The risk is that the additional inventory could slow or even kill the nascent recovery in housing. As for new homes, median prices fell 5.0% from May to June, but inventories tightened. Keep in mind, however, that home builders can and do exercise direct control over the supply of new homes.

So if there is any jumping off the fence going on, it appears to be isolated to the new home market. That's a market that typically attracts higher income buyers since median prices for new homes are higher than they are for existing homes. Currently, the premium is about 16%. While this bodes well for home builders, the news is not so good for homeowners who have been wanting to sell. Furthermore, because new home sales account for less than 10% of all home sales, in the aggregate, it appears that the real estate market still faces significant challenges.

In the final analysis, it all goes back to jobs. A strong housing recovery depends on a strong jobs recovery. The evidence, however, suggests that much of the recent growth in jobs is taking place in low wage service categories such as restaurants and bars. (See Despite June's Report, The Employment Situation is Still Extremely Poor.) Unfortunately, those are not the kinds of jobs that typically generate the income needed to support a monthly mortgage payment.