MARKET TRENDS: New Home Sales Down, Manufacturing Picks Up

Recent gains in the U.S. housing market were slightly offset with new single family home sales posting a larger than expected decline in June. New home sales dropped for the second consecutive month to its lowest level in the past seven months, while May’s sales were also revised sharply lower. Sales of new single family homes declined 6.8% to a seasonally adjusted annual rate of 482,000 units, the lowest level since last November, the Commerce Department said on Friday. May’s sales were revised down to 517,000 units from the initially reported 546,000 units. Market had expected new home sales to decline by a modest 0.1% to 546,000 units. Despite the decline, sales were up 18.1% on a yearly basis with a stronger job market and lower mortgage rates. The overall housing market recovery remains intact, encouraged by solid existing home sales data. A government report on Wednesday stated housing resale to have jumped to a more than eight-year high in June. Building permits were close to its eight-year high and housing starts were solid, added the release.

Regionally, new homes sales jumped 28% in the Northeast after soaring 78.6% in May. Sales fell 17% in the West and were down 11.1% in the Midwest. In the South, sales slipped 4.1%. New house inventories were up 3.4% to 215,000 last month, the highest since May 2010 while supply remains low. At June’s sales pace it would take about 5.4 months to clear the supply of houses on the market, the most since last November. That was up from 4.8 months in May. The median price of a new home fell 1.8% from a year ago to $281,800.

Meanwhile, manufacturing activities in the U.S. recovered from its 20-months low in June. The Markit Flash U.S. Manufacturing PMI, a gauge on the U.S. manufacturing sector as a whole, came in at 53.8 for the month of July, slightly above the consensus estimate of 53.6, and a similar reading in the previous month. The gain in the Index is attributed to a stronger rise in production and new businesses. Subdued demand in the international market and strengthening dollar rates have forced the U.S. manufacturers to focus on the domestic markets. Although, the Index indicates overall growth, but there is still some weakness. Output and new business volumes expanded at faster rates in July, but job creation eased to its weakest since April. The Markit PMI has been consistently stronger than the manufacturing Institute of Supply Management Index (along with most regional factory surveys), since the beginning of the year.

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