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New Home Sales Pull Back in August

Corrected version.

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Sales of new single-family homes fell in August after posting strong gains for much of the past year. Sales came in at a seasonally-adjusted annual rate of 609,000, down from 659,000 in July, a drop of 10.7 percent.  However, that is 33 percent above the September 2015 rate of 457,000. New home sales have been trending higher since bottoming out in 2010-2011 and are now in the 600,000 to 800,000 range that was typical in economic expansions before the housing bubble of the 2000s.

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At the same time, new single-family home construction has been picking up with new home starts coming in at a 722,000 pace in August. Though that pace is well above the recession lows, it is still below the 1,000,000+ pace that occurred in prior expansions.

Overall, single-family sales and starts have been trending higher since the end of the last recession but neither is pointing to a strong housing market. However, the inventory of new homes for sale paints a different picture. The months’ supply of new homes on the market currently comes in at 4.6 months in August, only slightly above the average of about 4 months during the height of the housing boom, lower than the 5 to 7 month supply that was typical in prior expansions and much lower than the peaks of 10 months or more during prior recessions.

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Housing markets will always be “local” but on an aggregate level, activity measures continue to trend higher while inventory remains tight.

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