While we will have much more to say about the price dynamics in the West in a follow up post, where the Western housing market appears to be appreciated right now is in the just released New Home Sales report, which showed that in May new home sales soared by a whopping 18.6%, orders of magnitude above the 1.4% increase expected, and resulting in some 504K new houses sold, far above the 439K expected, and certainly above the downward revised April print of 425K. What caused this surge? Simple: the West, which saw a 34% surge in new home sales, from 97K to 130K, the highest one month jump since February 2013.
So a full blown recovery? Well, not quite. Here is the chart showing long-term demand for new homes since the last housing bubble: the May print of 504K was just 64% below the pre-crisis high of 1,389K.
In other words, there is demand for houses... Just existing houses, i.e., those where millionaire can park their laundered cash. New homes, those which typically are the target of first time home buyers, are not doing quite as hot.
Finally, one reason why new home sales may have soared in May: the average new home prices just dropped to $319,200: the lowest since August 2013.