U.S. new home sales fall in August, likely to show strong improvement relative to H1 trends

New home sales in the U.S. dropped in August and came in line with market consensus. Sales declined 7.6 percent in sequential terms to 609,000, as compared with market projections of 600,000. In July, new home sales had risen sharply by a revised 13.8 percent month-on-month to 659,000. A portion of this increase is believed to be retraced in August, said Barclays in a research note.

However, the average pace of sales in July and August came in at 634,000 and is quite above the 571,000 and 529,000 averages recorded in the second quarter and the first quarter respectively. This implies that new home sales are expected to indicate strong improvement as compared to the trends seen in the first half of the year.

Delving into regional data, sales were seen declining in the Northeast by 34 percent, in Midwest by 2.4 percent and in the South by 12.3 percent sequentially. On the contrary, sales in the West rose by 8 percent to 162,000. The deceleration in the monthly pace of sales led to inventories ticking modestly higher to 235,000 in August from 231,000 in July. This left the months’ supply of inventory at 4.6 in August from 4.2 in July.

According to Barclays, the decline in new home sales in August was slightly larger than anticipated, suggesting slightly less growth in brokers’ commissions and, in turn, residential investment. However, after rounding, the Q3 GDP tracking estimate continues to be the same at 2.4 percent, added Barclays.