The May U.S. new home sales report sharply undershot estimates
The May U.S. new home sales report sharply undershot estimates with a 7.8% May sales drop to a 626k pace after net downward revisions in March and April, as analysts further unwound the out-sized Q1 surge. The April sales rate was lifted slightly to 679k from 673k, while the April figure was lowered to 705k from 723k, leaving that pace back below the 10-year high of 715k in November of 2017. Sales fell sharply in the west and modestly in the northeast, while rising in the south and midwest. Analysts now expect a Q2 pace of 648k for new home sales, after a quarterly cycle-high average pace in Q1 of 673k (was 679k). The median price fell 8.1% to $308,000 after a big April trimming to $335,100 (was $342,200). Inventories rose just 0.3% to 333k, versus a 347k cycle-high in January. Analysts still expect Q2 GDP growth of 1.9%, with a -2.9% Q2 growth rate in "real" residential construction after a -3.5% figure in Q1. Analysts're seeing a second wind for some, though clearly not all, of the housing series. Market turmoil damaged housing market sentiment in December, and then in May, though analysts're benefiting from the drop in mortgage rates with the Fed's pivot. Thus far, analysts've seen no lift for the important construction spending data that drive the construction components of GDP however, and analysts still foresee an anemic trajectory for housing through the remainder of the expansion.