skip navigation

By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.


July New-Home Sales Plunge, but Huge Revision Up to June

Today’s new-home sales release was a truly herky-jerky piece of news. New-home sales for July showed a -12.8% decline, but there was a +12.7% upward revision to the estimate for June’s sales. On net, the July sales level was a relatively minor -1.7% below what June sales were estimated to be a month ago.

A look at new-home sales (green line) in the accompanying chart does not show the weakness one would expect from the harsh-sounding -12.8% July decline. Rather, the picture for homebuilding is much as we have described it throughout this year. Homebuilding (single-family housing starts) has declined in response to an inventory overhang, but underlying demand for new homes has held up reasonably well, enough so to think that homebuilding will stabilize once the inventory overhang has been remedied. Even with the announced July decline, new-home sales levels look largely flat—but volatile—around an underlying level of 650,000 per year.

So, what about inventories of unsold homes? They rose further in July, such that inventories of unsold new homes now stand at 6.4 months’ worth of sales. This is down from 7.4 months at the start of the year, but is still well above "normal" (sustainable?) levels of around 4 months’ worth of sales. Inventories of completed new homes rose most noticeably, while inventories of unsold homes under construction declined.

So, the overhang of unsold homes is most glaring among completed homes, exactly where they tie up the most (idle) capital for homebuilders and so exactly where they are most an issue for builders. As before, we expect housing starts and construction levels to continue to decline until inventories of unsold homes have dropped substantially from current levels. This will take further, sustained declines in housing start levels and would seem at present to take another three to six months.

While we expect further declines in homebuilding, we don’t foresee a prolonged, tumultuous decline such as occurred over 2006-09. Besides the generally flat trend for new-home sales overall, the regional new-home sales data also support this contention. That is, the South accounts for over half of all US homebuilding, and new-home sales and starts in the South continue to hold up very well, with most of the decline in starts occurring elsewhere in the US.

Sales and Starts of New, Single-Family Homes
Sales and Starts of New, Single-Family Homes
Source: Census Bureau. As of 31 Jul 19

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 45 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

Sign up to receive email updates as new reports are released.

© Western Asset Management Company, LLC 2022. This publication is the property of Western Asset and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. This publication is for informational purposes only and reflects the current opinions of Western Asset. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorized and regulated by Comissão de Valores Mobiliários and Brazilian Central Bank. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan. Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) (FRN 145930). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK as defined by the FCA. This communication may also be intended for certain EEA countries where Western Asset has been granted permission to do so. For the current list of the approved EEA countries please contact Western Asset at +44 (0)20 7422 3000.