US new home sales to resume upward trend

Despite a significant correction in March, new home sales remain firmly on an upward trajectory. This trend is expected to continue with a 7% sequential increase in April to 515k. 

Over the past two quarters, household formations have averaged at 1.5 mln which significantly outpaces housing starts. 

Although a large portion of this incremental incrase in demand may show up in the rental market, some marginal support is expected for the for-sale market as well. This view is reinforce by the recent pickup in mortgage which are up 13% yoy. 

"We expect housing to contribute 0.4% to growth this year, which would mark the largest contribution since 2012", Said Societe Generale in a report on Tuesday.