After the disappointing (but not unexpected) decline in existing home sales, new home sales - of course - saw a big upward surprise 4.4% MoM surge in sales, leaving year-over-year sales up an astonishing 31.5%...
Source: Bloomberg
The divergence between new and existing home sales continues to gape wider...
Source: Bloomberg
As a reminder, we have seen huge downward revisions to new home sales figures this year...
Source: Bloomberg
Supply continues to shrink...
Source: Bloomberg
...which helped push median new home sales prices back up in July - even as mortgage rates began to spike...
Finally, we note the dramatic gap between the current 30Y mortgage rate and the effective rates that borrowers are currently paying on their home loans...
Source: Bloomberg
The gap hasn't been this wide since the early 1980s - which helps explain why inventories of existing homes for sale are so low... and thus 'new homes', subsidized by homebuilders, is the only option for many.
That's quite subsidy...
Are home-builder stocks starting to catch on?
But how long can homebuilders continue bleeding profitability to fill that gap?
