Economists surveyed by Bloomberg expect new home sales to rise to an annual rate of 370K in June when the data is released tomorrow morning.
Deutsche Bank’s Joseph LaVorgna, however, expects home sales to come in shy of expectations at an annual rate of 345K in June, down from 369K the previous month.
Irrespective though, LaVorgna says any reading between 317K and 421K “can be considered noise”. This is because new home sales tend to be extremely volatile, and in the past 10 years, a one standard deviation monthly per cent change has equaled a 7 per cent increase, but this isn’t statistically significant. “This means that at the current level of home sales, any reading between 317k and 421k can be considered noise.”
But he warns that there are downside risks to current numbers because there have been very few new homes built over several years. Housing starts for instance fell to a record-low in 2009 at 554,000 and have only barely recovered to 586K in 2010, and 612K in 2011.
“The lack of building means it is doubtful we can see a sustained rise in home sales even toward the higher end of their range,” according to LaVorgna.
There is however a silver lining. “However, based on the National Association of Home builders’ (NAHB) housing market index, we expect this situation to change over the next couple of years.”
LaVorgna expects housing starts to end the year above 1.2 million units and he says housing is finally starting to play a role in helping the U.S. economy.
Photo: Deutsche Bank
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