US: New Home Sales

Wed Feb 25 09:00:00 CST 2015

Consensus Consensus Range Actual Previous Revised
New Home Sales - Level - SAAR 471K 440K to 495K 481K 481K 482K

Sales of new homes in January, at a better-than-expected 481,000 annual pace, managed to hold onto December's big surge when sales jumped 8.1 percent to 482,000 (revised). January's strength is centered in what is by far the largest region, the South, where sales rose 2.2 percent. Sales slipped 0.8 percent in the West which is second, and a very distant second, in size to the South.

Price concessions may have helped sales as the median fell 2.6 percent to $294,000. The dip is minor and the year-on-year median is still up significantly at plus 9.1 percent, but it does underscore price weakness in Monday's existing home sales report.

Inventory has been on the thin side for the last 5 years but, at 218,000 units now on the market, is the highest since March 2010. But relative to sales, inventory still looks thin at 5.4 months which should encourage builders to step up activity.

Technical adjustments play an outsized role in housing data during the winter months when sales are slow, but this report helps shore up the housing outlook which, after the very soft existing home sales report, shifted lower. Watch to see if this report is mentioned in today's question and answers with Fed Chair Janet Yellen who yesterday described the housing sector as surprisingly depressed.

Market Consensus Before Announcement
New home sales surged 11.6 percent in December to a 481,000 annual rate that was outside the top estimate of the Econoday forecast (445,000 to 470,000). This followed a 6.7 percent drop in November. 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.

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.