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.
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.
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