US housing market remains strong, trend to continue for next 2 years

US new home sales grew 16.6% on a sequential basis last month to 619k, as compared with consensus projections of 511k. Moreover, earlier months’ sales were upwardly revised by 44k on net. The growth in sales affirms the view than US housing market continues to be strong in spite of certain volatility in recent months, said Barclays in a research report. US housing is likely to continue strengthening on average in the next two years as strong consumer sector exerts upward pressure on volumes as well as prices, added Barclays.

However, April’s rise appears to be huge. Some of the gains are believed to reflect sales pulled from future months, and that the gains are likely to be reversed in the next two months, noted Barclays. The sharp rise in sales in April was mainly due to activity throughout regions, with an exception of the Midwest that recorded a slight slowdown. In the Northeast region, sales grew by 19,000, whereas in the South it grew by 48,000. In the West, sales grew strongly by 18.8%; however the growth showed a recovery from very weak sales in March.

The series’ level largely remained the same this year. Rapid sales lowered months’ supply sharply to 4.7 in April from 5.5 in March. Also, the prices were quite robust. Median prices increased 6.8% on a sequential basis to USD 321,000, whereas average prices increased more rapidly by 7.3% m/m to USD 380,000.

April’s above expected new home sales data increased the profile for the entire Q2 sales, suggesting additional brokers’ commissions in the second quarter, said Barclays. Moreover, single-family homes’ median and average selling price came above projections, suggesting additional nominal single-family construction spending.