Following last month’s dismal showing, new home sales rebounded pretty much in-line with estimates, with the Western region leading the way.
Year-on-year sales are up in the West by 10.2% and the Midwest by 1.2%. Sales are down in 3.8% in the Northeast, and 14.3% in the South.
There is not a lot of overall traction.
New home sales came in at a 512,000 seasonally adjusted annualized rate of 512,000 (SAAR), pretty near the Bloomberg Econoday Consensus estimate of 510,000.
Highlights
A burst of strength in the West supported a roughly as expected 2.0 percent rise in February new home sales to an annualized rate of 512,000. Sales in the West, which is a key region for the new home market, jumped 39 percent to reverse January’s 33 percent flop. The swings in this region are a reminder that new home sales, because of small samples, are subject to extreme month-to-month volatility.
February’s gain for sales didn’t come at the expense of discounting, based on the median price which jumped a monthly 6.2 percent to $301,400 but short of September’s record of $307,600. And the median price compared to sales does look high, up a very modest but possibly unsustainable 2.6 percent year-on-year vs a sharp decline of 6.1 percent for sales.
Lack of supply has been a problem for both existing home sales and also new home sales, with supply in the latter having been held down by a topping out in permits and also by supply constraints in the construction sector including for labor. Supply did edge 4,000 higher to a 7-year high of 240,000 units but supply relative to sales is unchanged at 5.6 months.
Looking at year-on-year sales rates for regions, the West, after its big showing in February, is back in front at plus 10.2 percent. The Midwest is up only 1.9 percent and the Northeast and South are both down, at 3.8 percent and 14.3 percent respectively. These declines, especially for the South which is a very large region, are a reminder of how soft new home sales have been.
Yet today’s report, which includes the gain for prices, is a plus for housing, a sector that has opened the year on a soft note.
Recent History
Showing no momentum, new home sales have been struggling to hold above a 500,000 annualized pace over the past year. And price discounting may be accelerating with the year-on-year median down nearly 5 percent in the January report. Permits for new homes had been climbing but are now flattening out, not getting much boost from pricing but also reflecting lack of available lots as well as supply constraints in the construction sector. Forecasters see February sales at a 510,000 rate in what would be a small but still welcome gain from January’s 494,000.
New Home Sales
It’s easy to spot the lack of momentum in housing starting a year ago. This is a muddle-through track, and a weak one at that.
Mike “Mish” Shedlock
One would have to be pretty confident about their employment to buying a house at this juncture.
Mish – now you’re posting too much quality info, too fast!
Thanks for your great writing!
Here in AZ, anyone that has not purchased a house in the last 3 years is a “first time buyer” and can qualify for $0 down $0 closing cost purchase programs for a $200K house under various government programs with credit scores of 640-670, a child under 2 (so paying daycare), a 7 year $500 car payment, in current job less than 6 months with monthly income of $5000, previous jobs at $2000/mo. This is true for used or new houses. My 21 and 23 year old son and daughter each bought houses this way recently. Neither of them has a college degree, one is a small shop welder and the other works for a bank credit department. Of course sales are up!
It was recently mentioned on KNX news radio that over 80% can’t afford a starter house in Los Angeles.
They have to bring back the loan gimmicks to allow debt slaves to buy. Prudent people do not buy when the cost is too high. Fools rush in where angels fear to tread.