US: New Home Sales

Fri Mar 23 09:00:00 CDT 2018

Consensus Consensus Range Actual Previous Revised
New Home Sales - Level - SAAR 620K 600K to 660K 618K 593K 622K

New home sales came in near expectations, at a 618,000 annualized rate in February with upward revisions in the prior two months totaling 39,000. Despite the results, February sales are up only 0.5 percent year-on-year.

Prices, however, are showing traction, up 0.6 percent in the month to a median $326,800 which is up a very solid 9.7 percent year-on-year. And supply is moving into the market, up a monthly 2.0 percent to 305,000 units for a yearly increase of 16.0 percent. On a sales basis, supply is at a healthy 5.9 months vs 5.8 in January.

The Northeast has been coming on strongly in this report with sales up 19.4 percent in the month to a 37,000 annual rate and an 8.8 percent yearly gain. The South, which is by far the largest housing region, was also strong in the month, up 9.0 percent to 338,000 though this yearly gain is only 0.6 percent. The West fell a monthly 17.6 percent to a 164,000 rate for a year-on-year plus 3.1 percent with the Midwest down 3.7 percent in the month to 79,000 and an 8.1 percent yearly decline.

Sales, whether for new homes or existing, have been struggling to gain traction so far this year. But they did end last year on an up note and heavy weather always makes winter a tough time to judge for housing. But rising supply and a strong jobs market are pluses for the new home market going into the spring selling season which will help offset drag from rising mortgage rates.

Market Consensus Before Announcement
Supply has been moving into the market which should help new home sales for February where the annualized rate is expected to come in at 620,000 vs January's 593,000. New home sales surged at the end of last year and strength in February could boost confidence for extending strength into this year.

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.