By David Urani
The Census Bureau reported January new home sales, and what a surprise it was. Sales were up 9.6% month to month, and up 2.2% year over year to an annual rate of 468k. This comes in well above the consensus estimate calling for a 3% decline to 400k. Furthermore, the 468k reading represents the highest level of sales since 2008. What also makes it particularly interesting is that recent data including existing home sales and housing permits showed declines of 5% each in January.
We do note, as we have with other recent housing data, that this is a slow winter month and was always likely to show some volatility with seasonal adjustments. Most notably, the Northeast showed an exaggerated 74% spike to 33k, following a big 41% plunge in the previous month. Meanwhile, the Midwest was the one region that actually declined, by 17%. So with that said, the data shows some inconsistency and we’d like to see how it holds up over the next couple of months, especially as we head into the Spring selling season.
And the supply side is always important to look at as well. It’s been essentially flat for the past four months at 184k, which historically is a very low level. Meanwhile given the increase in sales the current supply is 4.7 months’ worth, down from 5.2. That low supply will give continued support for home construction and prices.
You have to be encouraged by the new multi-year high reading, and given that the new home sales report is somewhat more forward looking than the likes of existing home sales (since the sales are recorded when the order takes place rather than upon completion) it bodes well going into the Spring. And then of course there’s the weather element; in a way I’m left wondering why sales weren’t impacted by the weather (and that also seems to have been built into the consensus as well). But at the same time, it’s impressive that we did hit the multi-year high amid the harsh weather.
There are still questions to be answered here and the data is clearly still volatile, so as I said before I’d like to see this hold up for a couple of more months. But it certainly contradicts some of the other reports in housing lately and suggests the selling season is unfolding well.