New home sales rebound off record low

New home sales jumped 23.6% in June to a still-low level of 330,000 units (though this level was above expectations). The supply of new homes fell 1.4% in June to 210,000, the lowest since September 1968. The supply of new homes in relation to sales fell to 7.6 months in June from 9.6 months in May.

BOTTOM LINE: The recent volatility in new home sales reflects the expiration of the homebuyers’ tax credit for signed contracts. Since sales were probably borrowed forward ahead of the end of the tax credit, we think it will take a few months before we will get a better picture of the underlying trend in new home sales (and even longer for existing home sales given the extension of the tax credit for contract closings to the end of September).


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