New Home Sales Surge by 20% in August

Yields rise ahead of key economic data. UST yields ground higher over the course of a relatively quiet day. Markets largely shrugged off hot new home sales data, and instead looked ahead to tomorrow’s GDP release and Friday’s PCE data. The 2-year yield ended ~2 bps higher at ~3.60%, while the 10-year yield climbed ~4 bps to close at ~4.15%. Meanwhile, major equity indices closed lower for a second consecutive day due to renewed concerns about an AI bubble. The S&P 500 and NASDAQ fell ~0.30% and ~0.35%, respectively.

August new home sales surge by 20%. Today’s data showed 800k new home sales in August, far above the expected 650k and the previous month’s 652k. The increase marked the fastest pace of new single-family home sales since early 2022 and was largely driven by price cuts. In a recent survey by the National Association of Home Builders, in August 37% of builders reported cutting prices to attract buyers. These price incentives helped offset the oversupply of new homes as strong sales numbers pushed new home inventory to 490k units, its lowest level this year. In addition to builders’ price cuts, mortgage rates in August slid down to the lowest levels since last October, and the expected continued decline of mortgage rates is likely to further support sales in the coming months.

Bessent backs Miran on aggressive rate cuts, says Fed Chair search is ongoing. In a television interview this morning Treasury Secretary Scott Bessent said that current policy “rates are too restrictive, they need to come down.” Bessent also expressed his “surprise” that Fed Chair Jerome Powell “hasn’t signaled…a destination before the end of the year of at least 100 to 150 basis points [of rate cuts].” The suggestion diverges significantly from the Fed’s dot plot which currently shows just 50 basis points of cuts through the end of the year. The Secretary went on to praise new Fed Governor Stephen Miran who, at last week FOMC’s meeting, dissented in favor of a larger, 50 basis point cut. Bessent also discussed the ongoing search for a new Fed Chair, stating there are 11 candidates and that interviews will be happening next week. There has been frequent reporting in recent months on the Trump Administration’s progress in naming Chair Powell’s successor, but as it stands it seems there is no clear front runner.