New Home Sales Improve in February

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales ROSE 4.9 percent in February to 667,000;
  • The unsold inventory of new homes DROPPED 2,000 in February to 640,000;
  • The months’ supply of new homes for sale FELL to 6.1 in February from 6.5 in January;
  • Median price of a new home ROSE $11,200, 3.8 percent, from January to $315,300; but year-year the median price was off $11,900 or 3.6 percent;

Trends:

  • The number of contracts for the sale of new homes is at its highest level since last March (2018);
  • The pace of new home sales in January was revised up to 636,000 from 607,000 turning the initially reported decline into a gain;
  • The year-year drop in the median price of a new home was fourth consecutive monthly decline;

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

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The Census-HUD report on new homes (contracts for sale) offered some explanation for the steady optimism of home builders as sales rose fort eh second straight month in February.

The trend Census-HUD report is in marked contrast to the parallel pending home sales report issued Thursday by the National Association of Realtors which showed a 1 percent decline in contracts for sale of existing single-family homes in February. Unlike the NAR, the government does not report on completed sales which typically occur one-to-two months after contracts are signed.

(Friday’s report means the Census Bureau and Department of Housing and Urban Development has caught up with monthly reports delayed because of the partial government shutdown.)

The National Association of Home Builders reported last week its Housing Market Index, often referred to as builder confidence, remained at a solid 62 in March (based on February since the survey is conducted in the first 10 days of the month). There had seemed to be no data supporting the solid showing but now there is with the reversal of January’s decline and another strong month in February. It was the first time the sales rate increased in two straight months since February-March 2018.

The outlook could even be brighter as, according to the weekly Freddie Mac mortgage rate survey, the rate for a 30-year fixed rate loan fell 22 basis points last week, the largest week-week decline since June 2009 when rates fell 21 basis points.

Typically, though when rates start to drop buyers hold back expecting even further declines. While that may not help builder profits as much, it will help furniture and appliance retailers and swell the number of construction jobs. Earlier this month, the Bureau of Labor statistics reported the number of residential construction jobs fell 11,000 in February, the largest month-month decline since October 2010 during the Great Recession.

Earlier this week, the Bureau of Economic Analysis reported residential fixed investment spending dropped 7.3 billion in the fourth quarter and for all of 2018 was off 23.3 percent from a year earlier. Residential fixed investment (essentially home building) accounts for about 3.3 percent of total Gross Domestic Product.

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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