U.S. new home sales surge in June

U.S. new home sales rose 13.8 percent sequentially in June, the second consecutive month of rise in sales at a double-digit rate. Further rebounds were seen throughout all regions with sales in the Northeast, West, Midwest, and the South all higher than during the previous month. The rate of growth was slower in the South, which is unsurprising given the bulk of the new infections from COVID-19 now occurring in states in the South. Moreover, sales activity already recovered pretty strongly in the South in May and at 434k SAAR, current sales have already exceeded the pre-COVID-19 level and stand at their highest since September 2019.

The May and June reports are quite encouraging and believe the housing sector has recovered well so far, underpinned by monetary policy and fiscal policy. Moreover, a desire from households to move to suburban areas with more space and more flexible working arrangements for the time being might be further supporting home sales, said Barclays in a research report.

One concern we have about the near-term outlook is how sustainable further rises would be in the months ahead once pent-up demand for home sales has dried up after the lockdown measures are eased. This is especially of concern if the fiscal policy support that has stimulated household balance sheets until now is not renewed in order to bridge the gap until further labor market improvements bring the jobless rate closer to pre-pandemic levels.

“We believe that as with the overall outlook, there is an unusually high degree of uncertainty regarding housing activity, and how it plays out will depend on the spread of the virus itself, how quickly the private sector recovers, and the success of the fiscal and monetary response. However, the housing sector entered the current downturn in relatively good shape, with a balance between inventory levels and demand, which should support a return to more normal levels of activity”, added Barclays