New Home Sales Drop Further in January

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales FELL 6.9 percent in January to 607,000;
  • The pace of sales for December, originally reported as 621,000, was revised upward to 652,000; November sales rate was also revised upward from 599,000 to 628,000
  • The unsold inventory of new homes DECREASED 5,000 in January to 336,000;
  • The months’ supply of new homes for sale ROSE to 6.6 in January from 6.3 in December;
  • Median price of a new home FELL $1,900, 0.6 percent, from December to $317,200; year-year the median price was off $12,400 or 3.8 percent;

Trends:

  • The drop in inventory of new homes for sale was the first since March 2018;
  • New home sales in January were DOWN 4.1 percent from January 2018, the fourth year-year decline in the last five months;
  • The year-year drop in the median price of a new home was third consecutive monthly decline;

Data Source: Census Bureau and Department of Housing and Urban Development

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There was an underlying message in the government’s monthly report on new home sales (contracts) which actually had only a tangential relationship to the subject matter: the pause in economic data due to the partial government shutdown could result in bad business decisions.

The report from the Census Bureau and HUD on January new home sales was originally scheduled for release at the end of February but without hard information on new home sales, home builders were driving blind when it came to decisions on what to build when and how many workers to hire.

Indeed, even as new home sales were falling, according to the Census Bureau which was affected by the shutdown, the number of construction job openings as reported by the Bureau of Labor Statistics — which was not shuttered – rose.

The slowdown in home sales and construction activity has belatedly shown up in other government data reports including the Bureau of Economic Analysis Gross Domestic Product release and the Census/HUD report on housing permits and starts, but those data dumps too came late. The GDP report reflected slower residential investment as total economic growth slipped.

The government report stood in contrast to the parallel data reported by the National Association of Realtors. NAR’s pending home sales report for January – tracking contracts and released at the end of February – noted a 4.6 percent increase in contracts for sale of existing single-family homes. The PHSI improvement was only the second in the last seven months.

According to the most recent government data on home building, housing permits increased 1.5 percent in January but the increase was concentrated in permits for multi-family, not single-family homes. Housing starts surged in January primarily due to single-family construction but that was before the home sales numbers were published. The weak new home sales data could reverse January’s construction trend.

Hear Mark Lieberman on P.O.T.U.S. (Sirius-XM 124) Friday at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

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