New homes sales hit the skids in December, down 10.4 percent. December numbers were revised slightly lower today.
The ever optimistic economists in the Econoday survey expected a huge rebound in new home sales in January from 535,000 units to 576,000 units SAAR (seasonally adjusted annualized rate).
Instead of the expected 41,000 increase in units, sales rose by 20,000 units.
New home sales have lost some traction and it’s not because of tightening supply. At 555,000, January’s annualized pace came in more than 20,000 below the Econoday consensus and includes a big downward revision, not to December which is 1,000 lower at 535,000, but the cycle high in November which has been cut by 23,000 to 575,000. This report is one of the most volatile on the calendar which puts the priority on moving averages including the 3-month average which has fallen steadily from a cycle peak of 587,000 in September to only 555,000 (which is the same as January’s rate).
Supply, however, is no longer as thin as it was, at 5.7 months at the January sales rate vs low 5 month rates through most of last year. The number of new homes on the market, at 265,000 for a 3.5 percent monthly jump, is a new cycle high (since July 2009). Permits for single-family homes have been on the climb which points to more supply ahead.
Rising supply is negative for prices and at $312,900, the median fell 1.0 percent in the month. The year-on-year rate, however, is still very solid at 7.5 percent.
Econoday labeled the report “constructive” even though the three-month average is down by 32,000 SAAR units and prices in January fell.
Econoday placed supply at 5.7 months, but Mortgage News Daily stated “At the end of January there were an estimated 261,000 homes available for sale (a non-adjusted figure.) This is a larger inventory than existed during any month in 2016 and represents a 6.4-month supply at the current rate of sales.”
This is not March rate hike kind of news. CME Fedwatch shows the March rate hike probability is 22.1 percent.
Mike “Mish” Shedlock
Hi Mish:
A couple of points I want to make regarding new home sales:
1. Wherever interest rates start to go up, all of those people sitting on the fence start to buy â In my business I have seen a huge uptick starting in January â these files will close in the March/April time frame
2. As the Eurozone continues to melt down you will see capital fleeing the Eurozone to the US
Just my 2 cents!
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When interest rates spike some prospective buyers do jump off the fence and start to buy. I think that has indeed been the case. Unfortunately, that is a double-edge sword because it can also lead to a vacuum on the other side when rates stabilize, as they are now doing.
The unfortunate truth is that new homes are too damn expensive for many American buyers with stagnant incomes. Builders are shrinking lot sizes and stripping down product to keep prices competitive, but there is only so much you can strip out before the end product becomes unattractive.
The big gap between new and existing home sales is now a persistent feature because the Fed helped to make a mockery of the housing market…again!
http://aaronlayman.com/2017/02/disturbing-gap-new-home-sales/
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As the saying goes: beware academics baring models of the real world.
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In the Denver area, all the new build is extremely high end, with all the bathrooms you could never use.
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There is other players in this game. Many foreigners are buying U.S. real estate as a way of parking their money.
They do not seek rents nor appreciation, only a way to convert their currency into U.S. Dollars.
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March 15 Federal deadline for debt ceiling.
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