Sales of new U.S. single-family homes rebounded strongly in June from the prior month's record low, government data showed on Monday, driving the number of houses on the market to their lowest level in nearly 42 years.
KEY POINTS: * The Commerce Department said sales jumped 23.6 percent to a 330,000 unit annual rate from a downwardly revised 267,000 units in May. The sales pace last month was still the second lowest since records started in 1963. * The percentage increase was the largest increase since May 1980, and partially unwound the prior month's historic 36.7 percent decline. * Analysts polled by Reuters had forecast new home sales rising to a 320,000 unit pace last month from May's previously reported 300,000 units.
MICHAEL STRAUSS, SENIOR ECONOMIST, COMMONFUND, WILTON,
It shows a little bit of a bounce back from historical lows following the removal of some of the tax incentives.
The impressive thing is that we could get at least some pick up in spending although it is still a very very low level.
It shows that maybe lower interest rates and the fact that some of the pricing data is showing some signs of price stability in a lot of regions may be creating a situation where housing while it's weak is not going to be a major drag on economic activity going forward.
Granted, it's still 330,000. Even if this number was 430,000 it would still be a very weak number but from an investment standpoint as far as the supply of new homes on the market being close to in-line with the current sales pace suggests that as lower interest rates impact housing here maybe we'll see some further reduction in inventories which provide a little bit of support to the home builders.
TIM GHRISKEY, CHIEF INVESTMENT OFFICER, SOLARIS ASSET
MANAGEMENT, BEDFORD HILLS, NEW YORK:
A nice month for June -- 20,000 over the consensus estimate. May was revised down by 23,000. So taken together, it doesn't look great. But the markets are focusing in on more recent data as hopefully being indicative of what's ahead. So I think the data was positively received by the (stock) market. But this is just versus expectations, and I think it's early to extrapolate this into a turn in the housing market. The data has been distorted by the tax credits, and that's caused a lot of month-to-month variability. In general, this is a positive, that sales are increasing and we're working down that inventory, but it's not like this changes the view housing is going to be slow to recover.
JOHN DOYLE, SENIOR CURRENCY STRATEGIST, TEMPUS CONSULTING,
The data was pretty surprising, especially considering how poor the numbers were last month. So this was a nice jump. But the jury really is still out on housing now that the tax incentives have rolled off. Unless you see a continued pattern of positive numbers, I think traders are going to be skeptical. That's why the dollar reaction has been pretty muted, with it weakening only a bit against the euro. We still think it'll be tough for the euro to break above $1.30, as we saw a lot of sellers above that level last week.
TOM PORCELLI, SENIOR MARKET ECONOMIST, RBC CAPITAL MARKETS, NEW
It was better than expected on the headline but you would be doing yourself a disservice if you didn't notice that there was also a significant downward revision to the prior month. So if you average the last couple of months you are looking at a run rate of about 300,000, which is basically near an all-time low. So I wouldn't want people to get caught up in the headline, you have to look at the overall report, and what you notice from that is there is not a lot of activity going on in the new homes sales space.
From out perspective, with the unemployment rate still very high, a lack of demand for mortgages and banks not willing to make significant mortgage loans at this point, you are looking at a very moribund home sales market. That is true whether you are looking at the new or existing home sales space. We see it continuing to hover right here near the lows.
LINDSEY PIEGZA, U.S. ECONOMIST, FTN FINANCIAL, NEW YORK
Even though this is quite a considerable rise it does little to reinstate any kind of confidence in new home demand. We're still at very low levels; this is just suggesting that there is a lot of volatility month to month.
Going forward we're going to continue to see volatility here. One of the biggest factors is confidence.
It's not necessarily one number but we'd like to see that trend: I'd like to see slow, steady demand continue for several months in a row.
Looking at the median price, this is one of the scariest figures in this report, we're down 0.6 percent from where we were at this time last year. The idea that the economy was quite robust for the first three months of the year and now we've taken a significant step back is clear.
MARK VITNER, SENIOR ECONOMIST, WELLS FARGO SECURITIES,
CHARLOTTE, NORTH CAROLINA:
This strong number is really no surprise given that new home sales really could not fall any further. After such a horrendous drop in May, sales really had no where to go but up. Sales are still at a very low level and the three-month average is probably a better gauge of the absolute payback from the first time home buyers tax credit. We should have another weak month in July, but sales should pick up again in the fall.
The housing market is not going to get a true turnaround until there are sustained gains in employment, which is still a few months away. We need to see a string of 4 to 5 months of 100,000 private sector jobs created and that will ultimately pave the way for a housing rebound.
ROBERT RUSSELL, PRESIDENT, RUSSELL & COMPANY, FAIRBORN, OHIO:
(The new home sales data) is good news. We are heading in the right direction. This is strong in the short term, but overall we need more positive data than just new home sales and we need strong earnings reports to continue. But if all of that happens, that will bode well for corporate bonds.
MICHAEL O'ROURKE, CHIEF MARKET STRATEGIST, BTIG LLC, NEW YORK:
There was a big revision down in the prior month, but then obviously a rebound this month. We're still at these trough levels, which we've been bouncing along. It's a good sign that we did see an increase after the tax credit expired.
I wouldn't call these huge swings noise, but it is distorted data. We're still at a very low rate. Right now we're running about 60 percent below the average annualized rate for the last decade, so there's a lot of potential out there for improvement. It seems like sales are bottoming, so its just a matter of that foreclosure inventory clearing up. After that, then we can start seeing some upside. I expect that to happen later this year, maybe next year.
MARKET REACTION: STOCKS: U.S. stock indexes added to gains BONDS: U.S. Treasury debt prices pulled back DOLLAR: U.S. dollar posts slight gains against the yen