How Much Longer Can The Record New Home Sales-To-Price Divergence Continue

Moments ago the US Census Bureau reported the latest, July, new residential sales data, which at 507K, was a modest miss to expectations of 501K, if a substantial 5.4% rebound to June's 481K, which was to be expected: June was the lowest print since November 2014. The rebound was nearly across the board, with the only region posting a decline in July was Midwest where a 6.9% drop in new home sales was recorded: every other region saw gains, with the Northeast highest by far with a 23.1% sequential jump.

And while the July print was ok, in the context of the long-term chart we can see just how weak the housing recovery continues to be during the post-crisis cycle.

 

But the biggest surprise is not in the volumes of new homes sold, but the ongoing gaping divergence between volumes and prices. As we have shown previously, this record spread will have to close one way or another, and with the median new home sales price of $285,900 or virtually unchanged from a year ago, it would appear that new home buyers are finally starting to rebel against prices whose rise has far surpassed the increase in actual sales.

How much longer can this record divergence persist, even if as the chart above shows, it is slowly starting to converge.