New Home Sales Rise 11%, Crushing Market Expectations

New Home Sales rose by 11.0% in June, realizing an annual rate of sales of 384,000 units versus last month’s revised pace of 346,000.  This was the index’s largest gain in eight years. New home sales increased in every region, excluding the south.  The supply of new homes in June fell to 8.8 from 10.2 in May.  The median price for homes declined 5.8% to US$206,200 from US$221,600 in May.  This data coupled with positive surprises in other housing indicators, including starts and existing home sales, are indicative of a bottom in the housing sector.  Attractive mortgage rates, low home values, and tax incentives have been helping to bolster the sector, while weakness in the labor market and foreclosures continue acting as the sector’s strongest headwinds.