Durable Goods Orders Fall, New Home Sales Rise Pushing Down Housing Inventories

- Durable Goods Orders for August fell .5% versus estimates of a .5% gain and a 2.7% decline in July.
- Durables Ex Transports for August fell 2.0% versus estimates of a .5% gain and unch. in July.
- New Home Sales for August came in at 1040K versus estimates of 1050K and 1009K in July.

BOTTOM LINE: Orders placed with US factories for durable goods unexpectedly dropped in August, Bloomberg reported. Orders for non-defense capital goods excluding aircraft, a gauge of future business spending, fell .3% versus a .9% gain in July. Auto bookings rose 4.4% in August versus a 6.9% decline in July. Manufacturing is temporarily weakening, mainly due to auto production cutbacks, but should rebound over the intermediate-term.

New home sales in the US unexpectedly rose in August, signaling a possible stabilizing of the housing market. Plunging mortgage rates and bargain-hunting in many areas are helping. The median price of a new home is $237,000. New home sales are considered a leading indicator of the housing market. The number of unsold new homes fell to a 6.6-month supply at the current sales pace versus a 7-month supply in July. Sales rose 21.7% in the Northeast, 12.2% in the Midwest and 11.1% in the South. Purchases fell 17.7% in the West. Net home equity extraction fell to an annualized $141 billion in the second quarter versus $196 billion a year earlier, yet consumer spending remained healthy. I continue to believe housing will stabilize at relatively robust levels over the next few months after modest price declines.