US new home sales sink in August
US new home sales slowed sharply for the second straight month in August, relieving some pressure on a tight market, the Commerce Department reported yesterday. The decline brought the sales rate to its lowest level in since December while prices fell and inventories rose.
Sales fell 3.4 percent from July to an annual rate of 560,000, seasonally adjusted, surprising analysts who forecast a decline of only 0.5 percent. And the sales pace was 1.2 percent below the rate in August 2016. Meanwhile, July’s numbers were revised upwards slightly, somewhat muting the drop from June to 5.5 percent.
Officials said Hurricane Harvey, which made landfall in southeast Texas late last month, slowed the flow of data from some disaster stricken areas but its precise effect on the numbers was not immediately clear. At the current sales rate, the volume of homes for sale represented a supply of 6.1 months, up seven percent from July and the highest level in three years.
Meanwhile, the median home price fell 6.2 percent for the month to $298,000. Sales fell sharply in the US South, dropping 4.7 percent, and in the West and Northeast, declining by 2.7 percent and 2.6 percent, respectively. Though they can see big swings from month to month, August’s sales numbers could mean pressure is momentarily easing on would-be homebuyers. But analysts say the current economic recovery, with steady job creation and slowly rising wages, has created strong demand for housing and this trend is likely to continue. Impediments to construction, including scarce labor and rising costs for materials, have meant that supply has not kept pace with demand. Mickey Levy of Berenberg Capital Markets said the hurricanes’ destruction came at a moment when barriers to homebuilding already were stifling supply levels.
“The necessary rebuilding in the South will strain a housing sector already constrained by various supply factors,” he said in a note to clients, highlighting in particular workers shortages. “Builders will have difficulty finding skilled construction workers that are in short supply-residential construction employment is just touching 2002 levels, as employment in other sectors have long-passed 2002-07 levels.”
US consumer confidence slipped in September, partly weighed down by hurricanes Harvey and Irma which slammed into Texas and Florida, according to a monthly survey released yesterday. The monthly decline was less than forecast by analysts, who said the result actually showed underlying strength in consumer sentiment. However, some parts of the Conference Board survey showed signs of increasing pessimism. The consumer confidence index fell 0.6 points to 119.8, reversing two straight months of gains and bringing the level to its lowest point since June, according to the Conference Board.
A consensus forecast had expected the index to fall even further, to 119.4. “Consumer confidence decreased slightly in September after a marginal improvement in August,” Lynn Franco, the board’s head of indicators, said in a statement. “Confidence in Texas and Florida, however, decreased considerably, as these two states were the most severely impacted by Hurricanes Harvey and Irma.”
But on the whole, consumer attitudes about current conditions remained “quite favorable,” she added, saying that shortterm expectations were also bullish. However, consumers views of the current situation did darken slightly. The share of those saying conditions were “good” fell 0.6 points to 33.9 percent, while those saying conditions were “bad” rose by the same amount to 13.8 percent. The short-term outlook also showed some signs of increasing concerns, as the share of those expecting conditions to worsen rose 1.9 points to 9.9 percent, while those foreseeing an improvement rose just 0.4 points to 20.2 percent. The hit to confidence in the hurricane-affected zones was pronounced. In Texas, it fell 25.5 points to 119.9. And in Florida, it dropped 8.4 points to 126.7.
Economists say the storms, which forced millions to evacuate, caused tens of billions in damages and shuttered much of US oil production and refining capacity, should slow third-quarter GDP growth but spark a rebound at the end of the year.
Ian Shepherdson of Pantheon Macroeconomics said 2005’s Hurricane Katrina, which caused nearly 2,000 deaths in New Orleans, had caused a far larger dent in consumer sentiment.
“This report continues the pattern of much less bad post-hurricane data than after Katrina, despite the much bigger areas affected by Harvey and Irma,” he said in a research note. “It might not be the last word, and we can’t rule out a further decline in October, but so far it seems likely that the overall national economy will suffer only a brief and modest hit from the hurricanes.” — Agencies