Afternoon Note
According to the Census Bureau, new home sales declined 5.3% in June from May to a seasonally adjusted rate of 631,000 from a downwardly revised 666,000 (from 689,000). This was the largest monthly drop since December 2017.
Sales growth by Region:
The median sales price decreased 4.2% year-over-year to $302,100. Inventory of new homes for sale increased to 5.7 months’ supply from 5.3 in May due to the slower pace of sales. Sales growth declined in the face of falling prices.
The drop-in sales should not have come as a total surprise as mortgage applications for new homes in June dropped 12% from May and 8.8% from June 2017. Builders are in a conundrum as they are having difficulty passing rising prices for lumber and labor along to consumers. Lack of significant wage growth may be contributing to affordability issues. Year-over-year wage growth so far in 2018 has been 1.4%, while home prices have risen 7%. Home builder and construction stocks are lower on the news.
The market has a bit of a defensive tone to it today, as health care, consumer staples and utilities are leaders. On the downside financials, materials and consumer discretionary stocks are weak. Tupperware (TUP) is down 14% after reporting disappointing earnings.
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