In August, US new home sales dropped unexpectedly. New home sales fell by 0.3% M/M to a total level of 373 000, while the consensus was looking for an increase to 380 000. Regional details show a mixed picture as sales surged 20% M/M in the Northeast and rose also slightly in the Midwest (1.8% M/M) and West (0.9% M/M), while new home sales dropped in the South (-4.9% M/M). The weakness in the South might have been related to the Tropical Storm Isaac. The total number of new homes for sale stayed unchanged at 141 000 and months’ supply stabilized at 4.5 in August. Both median (11.2% M/M) and mean (9.1% M/M) prices rose sharply during the month.
Average prices are at the highest level since July 2008 and median prices are at the highest level since March 2007, providing further evidence that the US housing market is finally showing signs of a more sustainable recovery. Although the headline figure was somewhat poorer than expected, the underlying data remained strong as weakness was only based in the South, probably due to the Tropical Storm Isaac. We think that the US housing market is now finally on its way to a sustainable recovery which should be supported by the Fed’s measures in the coming months.