US new home sales beat expectations in July

Sales of new US single-family homes rose more than expected in July, according to figures released on Tuesday by the Commerce Department.

New home sales jumped 13.9% to a seasonally-adjusted annual rate of 901,000. This was the highest level since December 2006 and comfortably beat expectations for a 1.3% increase. June’s sales pace was revised up to 791,000 from 776,000 units.

Compared to the same month a year ago, sales were up 36.3%.

Meanwhile, the median price of a new home was $330,600, down from $337,000 in June.

Pantheon Macroeconomics said the consensus for new home sales always looked low, given soaring mortgage demand, but the surge in applications appears to be filtering into sales a bit faster than usual.

"We weren’t expecting a 900K-plus reading until August. But the direction of travel is clear," said economist Ian Shepherdson.

"With nominal mortgage rates at just over 3% and median new home prices up an average of 7.7% in the past two months, the implied real mortgage rate is negative. People who can qualify for a mortgage at or anywhere near the benchmark rate effectively are being paid to buy new homes, with tax-deductible interest and no capital gains taxes for most buyers. The only wrench in the works is the sudden jump in delinquencies on the existing stock of mortgage loans, which has already pushed up credit scores for successful new mortgage applicants, as lenders become more wary.

"We don’t see an immediate threat to the housing recovery, but lenders’ attitudes need to watched closely. For now, though, we see sales and prices rising further, despite massive job losses. The median new home buyer is aged about 47, so the loss of millions of hospitality and retail jobs hasn’t taken many people out of the pool of potential buyers, as most people in those positions are much younger."