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Record Home Sales

Even as the S&P 500 was falling to five-year lows in July, consumers were buying new homes at a record annual pace.

New home sales surged to 1.02 million, up 6.7% from June and 15.4% from a year ago. Sales of existing homes bounced back to a 5.33 million-unit pace after a June dip, rising 4.5% on the month and 0.6% on the year.

The lowest mortgage rates in decades, favorable demographic trends and limited supplies have kept housing demand and home prices on the rise. July data on the housing sector show the consumer remains confident and there are few traces of a bubble.

Far from being ready to cave in, the housing sector "could even strengthen a little bit," thanks to a more stable labor market and low rates, said Lakshman Achuthan, managing director of the Economic Cycle Research Institute.

While housing has strengthened as retail sales have flagged, Achuthan said it's a leading indicator that points to recovery.
New home sales in July broke the prior record of 1 million, set in December 2000. The big monthly rise came as June sales were revised from 1 million to 953,000.

The healthy supply-demand dynamics helped housing stay strong in the recession, Achuthan said. "Typically builders overbuild, and they get caught in a recession with too much supply."

Since they expected aging baby boomers to slow their home buying, they kept inventories low, he said. "They didn't prepare for the home-buying demand from immigrants," a key factor behind the current housing strength.