Somewhat softer report than expected.  New home sales rebounded 3.6% in July to a 372,000 annual rate after offsetting revisions to June (359,000 v. 350,000) and May (372,000 v. 382,000).  This left sales back at the two-year high hit in May, but the recent gains have not been nearly as impressive as the improvement in the National Association of Homebuilders' survey, which saw its biggest monthly gain in ten years in July and slightly extended the upside to a more than five-year high in August.  The last time the homebuilders' survey was at recent levels, new home sales were running over 800,000.  This suggests some potential for further near-term gains in sales, but mortgage applications for purchases are running at a six-month low in August as the weekly Bloomberg consumer confidence index has plunged to its lowest level of the year. While new home prices are more competitive and housing affordability by traditional metrics is still very high and unusually attractive relative to average rents, improvement in overall home sales continues to be restrained by tight mortgage lending conditions. The average credit score for new mortgage originations has moved sharply higher in recent years, however, to levels well above the average overall credit score, largely as a result of fears of GSE reps and warranties claims, so the universe of potential buyers who could take advantage of current high house affordability is limited. 

Bloomberg’s take: “Buyers are returning to the market to take advantage of cheaper properties and record-low mortgage rates, helping to boost orders at builders like Toll Brothers Inc. (TOL)Competition from foreclosures, unemployment exceeding 8 percent and limited credit pose hurdles to a more pronounced rebound, one reason Federal Reserve policy makers are monitoring housing data. “The new-home market is clearly signaling a steady and fairly strong recovery,” said Michael Englund, chief economist at Action Economics LLC in Boulder, Colorado. “Demand should continue to climb right on into 2013…””