Economy Watch: New Home Sales, Architectural Billings

New home sales turned up unexpectedly, to a level of 504,000 units; and the American Institute of Architects' billings index also increased.

Sales of new single-family houses in August were an annualized rate of 504,000 units, according to the Census Bureau and HUD on Wednesday. That’s 18 percent above the revised July rate of 427,000 units, and is 33 percent higher than the August 2013 rate of 379,000 units. It was an unexpected uptick, and the highest sales rate since May 2008.

Still, a sales range in the 500,000s is slightly low, historically speaking. During non-recessionary periods before the 2000s housing bubble, sales of 600,000 to 800,000 units per annum were more the norm.

The bureau and HUD also said that the number of new houses for sale nationwide at the end of August was 203,000, representing a supply of 4.8 months at the current sales rate. The government considers a house for sale when a permit to build has been issued in permit-issuing places, or work has begun on the footings or foundation in nonpermit areas, but a sales contract has not been signed nor a deposit accepted.


Architectural Activity Still Increasing

The American Institute of Architects reported on Wednesday that its Architecture Billings Index came in at 53.0 in August, down from 55.8 in July. Still, the score reflects an increase in activity for architects (any score above 50 indicates an increase in billings). As a leading economic indicator of construction activity, the index reflects the roughly nine- to 12- month lead time between architecture billings and construction spending.

The AIA also said that its new projects inquiry index was 62.6 in August, following a very strong mark of 66.0 the previous month. Moreover, the organization recently added a new indicator measuring trends in new design contracts, which provides a look at the direction of future architecture billings. The score for design contracts in August was 56.9, indicating expansion.

“One of the key triggers for accelerating growth at architecture firms is that long-stalled construction projects are starting to come back to life in many areas across the country,” AIA chief economist Kermit Baker, noted in a statement. “Long awaited access to credit from lending institutions and an increasing comfort level in the overall economy has helped revitalize the commercial real estate sector in recent months… a crucial component to a broader industry-wide recovery is the emerging demand for new projects such as education facilities, government buildings and, in some cases, hospitals.”

Wall Street bounced back on Wednesday, with the Dow Jones Industrial Average up 154.19 points, or 0.9 percent. The S&P 500 and the Nasdaq were up 0.78 percent and 1.03 percent, respectively.