US: New Home Sales


Mon Apr 25 09:00:00 CDT 2016

Consensus Consensus Range Actual Previous Revised
New Home Sales - Level - SAAR 522K 500K to 532K 511K 512K 519K

Highlights
Growth in new homes isn't spectacular but, given how soft general economic conditions are, the sector is posting moderate and still respectable numbers. March sales came in at a 511,000 annualized rate which is on the low side of expectations but the report includes a 7,000 upward revision to 519,000 for February which now stands as among the very best months since 2008. Year-on-year, sales are up 5.4 percent, right in line with permits which are up 4.6 percent.

Lack of new homes on the market, which has been holding down sales, improved a bit in April, to 246,000 units for a 2.1 percent monthly gain. And sales relative to supply is also improving, to 5.8 months vs 5.6 months in February and 5.1 months a year ago. Supply at 6.0 months relative to sales is generally considered to be consistent with a balanced market.

New homes aren't showing much price traction, down 3.2 percent in the month to a median $288,000 which is down, not up, 1.8 percent from last year.

Regional data are mixed. The Midwest shows an oversized gain in March with the South a solid gain and with year-on-year rates very solid for both, in the low to mid-double digits. But the West, which is a key region for new homes, is definitely lagging, down more than 20 percent on both the month and the year.

Spring is the big season for the housing market and this report, together with an uptick in last week's March report for existing home sales, do keep the door open for a solid season, one that could contribute to a needed pickup in the pace of the overall economy.

Market Consensus Before Announcement
New home sales have held near a 500,000 annualized pace since first approaching the rate in late 2014, this despite high levels of employment and low mortgage rates where the 30-year is still below 4 percent. The number of new homes coming into the market has been improving but is still lagging and holding down sales. Prices, however, are low and probably not holding down sales, showing only marginal sub-3 percent appreciation in this report. Forecasters see new homes holding near prior rates, up slightly to a 522,000 annualized rate for March which would follow last week's improvement in existing home sales to a 5.330 million rate.

Definition
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.



Description
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.