US: New Home Sales

Tue Apr 24 09:00:00 CDT 2018

Consensus Consensus Range Actual Previous Revised
New Home Sales - Level - SAAR 630K 610K to 687K 694K 618K 667K

The risk of volatility is always lurking in new home sales, a report where sample sizes are low and revisions often extreme. The revisions in today's report are fortunately on the upside and strongly so. But first the March data where the annualized sales rate rose 4.0 percent to 694,000 which exceeds Econoday's high estimate and is just off the expansion high of 711,000 set in November last year.

There's more strong news as the sales gain, like in yesterday's existing home sales report, didn't come at the expense of discounting as the median price rose 3.5 percent to $337,200. And the sales gain did not get any benefit from new supply as new single-family homes on the market were unchanged at 301,000 with the rate relative to sales falling, because of the rise in sales, to 5.2 months from 5.4 months.

Now the revisions which total 71,000 over the last two months: February now at 667,000 and January at 622,000. This week's housing data, which also include today's FHFA and Case-Shiller price data, have upgraded the outlook for the housing sector, from a hesitant pace to a solid and accelerating pace.

Market Consensus Before Announcement
New home sales peaked late last year but have been struggling since, held down by rising mortgage rates and limited supply. Forecasters see improvement for March, at a consensus 630,000 vs February's 618,000.

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.