U.S. new home sales unexpectedly rose in August 2022. Here's how Reuters covered the most important numbers in the story:

New home sales surged 28.8% to a seasonally adjusted annual rate of 685,000 units last month, the Commerce Department said on Tuesday. July's sales pace was revised higher to 532,000 units from the previously reported 511,000 units....

The median new house price in August was $436,800, an 8.04% increase from a year ago.

What Reuters didn't say is that August 2022's new home prices fell $29,500 (-6.3%) from its revised level of $466,300 in July 2022. That previous month's median new home sale price was itself revised 6.1% higher from the $439,400 it was initially reported to be a month earlier.

At the same time, mortgage rates dipped slightly from July to August 2022, falling from 5.41% to 5.22%. The unexpectedly high number of new home sales would appear to be the result of homebuyers recognizing that respite would likely be very short lived, who then scrambled to lock in the month's combination of lower mortgage rates and lower sale prices.

We'll take a closer look at what those changes mean for new home affordability next week, but for now, we'll look at what the combination of revisions and new information involving new home sales means for the U.S. new home market. Political Calculations' initial estimate of the trailing twelve month average market capitalization for new homes in the U.S. in August 2022 is $29.81 billion, down 5.1% from our initial estimate of $31.40 billion for July 2022.

Meanwhile, our revised estimate for July 2022 is $31.47 billion, a 0.2% increase from our initial estimate, confirming this month represents the peak for this measure in 2022. The large, upward revision in new home sale prices almost fully accounts for that outcome. The latest update of our chart shows U.S.' new home market cap's shifted trailing twelve month average.

The next two charts show the latest changes in the trends for new home sales and prices:

Sales continued trending downward:

Upward price trend is slowing:

We've included the raw monthly data for new home sales and their average monthly sale prices in these latter two charts to illustrate the month-to-month noise in the data. The data for new home sales is typically finalized some three months after it is first reported.

Looking forward, we anticipate September 2022 will see both fewer sales and lesser affordability given the spike in mortgage rates during the month. The next data release for new home sales will come on 26 October 2022.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 27 September 2022. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 27 September 2022. 

U.S. new home sales unexpectedly rose in August 2022. Here's how Reuters covered the most important numbers in the story:

New home sales surged 28.8% to a seasonally adjusted annual rate of 685,000 units last month, the Commerce Department said on Tuesday. July's sales pace was revised higher to 532,000 units from the previously reported 511,000 units....

The median new house price in August was $436,800, an 8.04% increase from a year ago.

What Reuters didn't say is that August 2022's new home prices fell $29,500 (-6.3%) from its revised level of $466,300 in July 2022. That previous month's median new home sale price was itself revised 6.1% higher from the $439,400 it was initially reported to be a month earlier.

At the same time, mortgage rates dipped slightly from July to August 2022, falling from 5.41% to 5.22%. The unexpectedly high number of new home sales would appear to be the result of homebuyers recognizing that respite would likely be very short lived, who then scrambled to lock in the month's combination of lower mortgage rates and lower sale prices.

We'll take a closer look at what those changes mean for new home affordability next week, but for now, we'll look at what the combination of revisions and new information involving new home sales means for the U.S. new home market. Political Calculations' initial estimate of the trailing twelve month average market capitalization for new homes in the U.S. in August 2022 is $29.81 billion, down 5.1% from our initial estimate of $31.40 billion for July 2022.

Meanwhile, our revised estimate for July 2022 is $31.47 billion, a 0.2% increase from our initial estimate, confirming this month represents the peak for this measure in 2022. The large, upward revision in new home sale prices almost fully accounts for that outcome. The latest update of our chart shows U.S.' new home market cap's shifted trailing twelve month average.

The next two charts show the latest changes in the trends for new home sales and prices:

Sales continued trending downward:

Upward price trend is slowing:

We've included the raw monthly data for new home sales and their average monthly sale prices in these latter two charts to illustrate the month-to-month noise in the data. The data for new home sales is typically finalized some three months after it is first reported.

Looking forward, we anticipate September 2022 will see both fewer sales and lesser affordability given the spike in mortgage rates during the month. The next data release for new home sales will come on 26 October 2022.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 27 September 2022. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 27 September 2022. 

The market capitalization of new homes in the U.S. is the product of two factors: average new home sale prices and the number of sales. Multiply these two numbers together and you have a direct measure of the relative health of the U.S. homebuilding industry.

After recent reports of plunging sales and falling prices for new homes in the U.S., we were fully braced to see the nation's new homes market cap follow suit. But once we got our hands on the latest data, we were in for a surprise. New home sales fell, but the average price of a new home sold in the U.S. spiked much higher.

Political Calculations initial estimate of the market cap for new homes in the U.S. in July 2022 is $31.40 billion, down 0.25% from our initial estimate of $31.48 billion for June 2022. Our revised estimate for June 2022 is $31.22 billion, a 0.8% reduction from our initial estimate, but against which, July 2022's estimated market cap represents an increase. The latest update of our chart shows the developing trend for the U.S.' new home market cap's shifted trailing twelve month average, which shows the market cap of new homes in the U.S. has hit a new post-housing bubble high:

The next two charts show the underlying shifted twelve month averages of sales and price data for the new home market cap:

New home sales continued falling:

Average sale price spiked up to $536,800:

In the latter two charts, we're also showing the raw monthly data for new home sales and their average monthly sale price. Reuters reports "new home sales tumbled 12.6% to a seasonally adjusted annual rate of 511,000 units last month, the lowest level since January 2016". The news service also reported the "median house price up 8.2% to $439,400 from year ago".

But in focusing on the median, Reuters missed what happened to the average. In July 2022, the average new home sale price was initially estimated to be $546,800. That's up by 19.6% from the previous month's revised estimate of $457,300 and is up +18.3% from a year ago. For reference, the average sale price of a new home in July 2022 is over 40% higher than their level at the bottom of the Coronavirus Pandemic Recession in April 2020.

This large difference between median and average indicates the bottom fell out of the bottom end of the new home market in July 2022 compared to the previous month. New home sales were dominated by high dollar value homes being bought in July 2022. That's why the initial estimate of the market cap for new homes in July 2022 rose to its highest level when compared with the revised data for recent months.

We think this current trend is not sustainable and the situation does not bode well for the U.S. economy in the second half of 2022. New home sales contribute anywhere from 3% to 5% of the nation's GDP, so a falling market cap for new homes will represent a headwind for the U.S. economy.

We'll look at the trend for the relative affordability of new homes in the U.S. during the first week of September 2022.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 23 August 2022. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 23 August 2022.