Sales of new single-family homes are up 7.2 percent to 670,000 in January after an upward revision to 625,000 in December, and down 19.4 percent year-over-year. The reading is well above the consensus of 617,000 in an Econoday survey. Sales got a boost from a dip in mortgage interest rates in January that consumers moved to take advantage of, especially with an increase in rates on the near horizon.

The supply of homes available for sale declined to 7.9 months' worth in January after 8.7 in December. Homebuilders have cut back on new construction in recent months with a slide in homebuying, so an uptick in purchases brought the supply down again. The median price of a new single-family home is down 8.2 percent month-over-month to $427,500, which is 0.7 percent below a year earlier. Industry reports indicate that builders are focusing on smaller and less expensive homes at a time when consumers are facing higher financing costs and consequent reduced affordability.

Among the unadjusted total of 59,000 homes sold in January, the share of homes under $300,000 is up to 15 percent from 9 percent in December, and between $300,000-$499,000 accounts for 53 percent of sales, up from 47 percent in December. New homes priced at $500,000 and over see their share down to 32 percent in January from 45 percent in December.

Many of the adjusted 670,000 sales of homes in January were not yet started with the share at 25 percent, up from 16 percent in December. Homes under construction account for 40 percent of total new sales, down from 44 percent in December, while completed homes are 34 percent of the sales, down from 41 percent in the prior month.

New home sales, which have been depressed, are expected to hold steady in January, at a 617,000 annualized rate in versus 616,000 in December.

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.