At some point – probably three or four months after Joe Biden takes the oath of office on January 20 of next year, G*d willing – the coronavirus pandemic is going to be brought under control in the US. At that point the long leading indicators are going to be very important in terms of the immediate direction of the US economy.
And the news on that score is very good, as shown by new home sales for June, reported this morning.
New home sales are extremely noisy and heavily revised, but they are the most leading of all of the housing metrics – even before permits. This morning they were reported at 776,000 units annualized (blue in the graph below), the highest since the onset of the Great Recession over 12 years ago:
Single-family home permits (red in the graph above, right scale) are much less noisy and tend to follow new home sales with a slight lag of 1 to 3 months. As you can see, these also rebounded sharply in June, although only half the way back to their pre-pandemic levels. Based on low mortgage rates and new home sales, I expect building permits and starts to follow shortly, and return to pre-pandemic levels as well.
Because home construction feeds through Into the broader economy over a period of 12 to 18 months, this will provide a tailwind for economic growth once the public feels safe in resuming normal activity.