U.S. New Home Sales Dip
New homes sales in the United States pulled back 0.6% in May to 342,000 units with April's initially reported 352,000 revised down to 344,000. Although the report disappointed expectations of a 2.3% increase in the month, the pace of sales remains above the all time low 329,000 recorded in January.
Geographically, weakness was focused in the South where sales fell 17,000. All other regions registered gains, with the Northeast up 6,000, the Midwest rising 8,000 and sales in the West rising 1,000.
Inventories of unsold new homes fell 7,000 in May. In terms or months' supply, unsold homes declined to 10.2 from 10.4. This represents an ongoing improvement from the cyclical high of 12.4 recorded in January of this year.
Overall, reports on U.S. housing activity for May point to stabilization at low levels. Although today's headline figure disappointed, inventories of unsold new homes continue to be pared. Moreover, yesterday's report on the rise in existing home sales for May followed the news that housing starts for rose 17.2% in May. On the business investment front, capital spending appears poised to regain some strength as orders for durable goods rose 1.8% in May. As today's new home sales report shows, despite signs of improvement in aspects of the economic backdrop, activity remains at low levels.
At the interest rate decision scheduled for later today, we expect the Federal Reserve to maintain interest rates within their current low range and reiterate its commitment to continued quantitative and credit easing. There has been some speculation that the Fed may commit to keeping its overnight target rate on hold until a particular date in the future as the Bank of Canada has done, given that long-term yields have been on the rise.
RBC Financial Group
http://www.rbc.com
The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.
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