US: New Home Sales

Wed Dec 23 09:00:00 CST 2015

Consensus Consensus Range Actual Previous Revised
New Home Sales - Level - SAAR 503K 479K to 531K 490K 495K 470K

Rising construction is bringing supply into the housing sector and helping to lift new home sales, which rose 4.3 percent in November to what is still however a lower-than-expected annualized rate of 490,000. The month-to-month gain follows a very strong 6.3 percent rise in October which, however, has been revised sharply lower to 470,000 from an initial 495,000. Houses for sale rose 5,000 in the month to 232,000 which is up from 210,000 in November last year. At the current sales rate, supply is at 5.7 months which, because of the rise in sales, is down slightly from October. Still, rising permit data point to more homes coming into the market.

Price data are also constructive, up 6.3 percent in the month to a median $305,000 with the year-on-year, which had been negative, up 0.8 percent. Still, this is a modest year-on-year rate and, relative to the very strong 9.1 percent year-on-year sales gain, points to discounting. Prices in this report appear to have room to move higher.

Regional sales data have the West up more than 20 percent in the month with the year-on-year rate at plus 4.7 percent. Sales in the South, which is by far the largest region, rose 4.5 percent in the month for an outstanding year-on-year gain of 19.4 percent. The Midwest and Northeast both show monthly and yearly declines.

Sales of existing homes have been limping along but sales of new home sales, despite all the monthly volatility which is routine for this report, are solid and look to remain solid.

Market Consensus Before Announcement
Samples are small and monthly data often swing wildly as new home sales soared 10.7 percent in October to nearly reverse a giant 12.9 percent plunge in September. At a consensus 503,000 annualized rate, Econoday forecasters see a comparatively tame 1.6 percent gain for sales in November. Supply of new homes has been tight but hasn't been helping prices which, in this report, were down a year-on-year 6.0 percent in October. Permits for single-family homes have been on the climb which does point to less tightness in supply ahead.

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.