US: New Home Sales

Tue Jan 27 09:00:00 CST 2015

Consensus Consensus Range Actual Previous Revised
New Home Sales - Level - SAAR 452K 445K to 470K 481K 438K 431K

New home sales surged 11.6 percent in December to a 481,000 annual rate that is outside the top estimate of the Econoday forecast (445,000 to 470,000). And, underscoring this morning's solid S&P Case-Shiller report, there's further evidence of price appreciation as the median rose 2.2 percent in the month to $298,100 for a solid year-on-year rate of plus 8.2 percent.

Though there were 2.3 percent more homes on the market in December, totaling 219,000, the gain in sales drew down supply relative to sales to 5.5 months from 6.0 months in November. The draw in supply is a negative for January sales but a positive motivation for builders to bring new homes on the market.

Regional sales data show a major 17.7 percent surge in the South which is by far the largest region for home sales. The Northeast, which is the smallest region, also shows a gain while the Midwest and West show declines.

Low mortgage rates and improvement in the jobs market may finally be giving the housing sector a long-needed lift. The Dow is inching off opening lows following today's report.

Market Consensus Before Announcement
New home sales for November came in below low-end expectations, down 1.6 percent in to an annual sales rate of 438,000 versus expectations for 460,000 and Econoday's low-end estimate for 440,000. Supply data were stable with 213,000 new homes on the market versus 210,000 in October. Supply relative to sales was up slightly, to 5.8 months from 5.7 and 5.5 months in the prior two months.

New home sales measure the number of newly constructed homes with a committed sale during the month. The level of new home sales indicates housing market trends and, in turn, economic momentum and consumer purchases of furniture and appliances.

This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as new home sales, investors can gain specific investment ideas as well as broad guidance for managing a portfolio. Each time the construction of a new home begins, it translates to more construction jobs, and income which will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items new home buyers might purchase. The economic "ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, new home sales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the new home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.