New home sales reached the highest level since July 2008 in January
Housing releases are important economic indicators. Besides indicating an increase or decrease in housing activity, they also give guidance across other segments of the economy, especially for construction and home furnishing companies. As buying a home is a large investment, these are some of the strongest consumer confidence indicators. Since consumption comprises over 70% of the economy, an improvement in these indicators will imply that the overall economy is improving.
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New home sales
New residential sales data for January 2014 was released on Wednesday, February 26, by the U.S. Department of Commerce Census Bureau. The seasonally adjusted annual rate (or SAAR) came in at 468,000—the report’s highest reading since July 2008, when new home sales were estimated at 477,000.
What are new home sales?
This indicator records the sale of newly constructed homes within the U.S. The headline number is new home sales, which is issued on a SAAR basis. The SAAR is the seasonally adjusted monthly value times 12. The benefit of the annual rate is that not only can one monthly estimate be compared with another, but monthly data can also be compared with an annual total. The seasonally adjusted annual rate is neither a forecast nor a projection. Rather, it’s a description of the rate of building permits, housing starts, housing completions, or new home sales in the particular month.
What did January’s reading indicate?
New home sales for January 2014 clocked in at a SAAR of 468,000, ahead of consensus estimates of ~400,000. New home sales were up 9.6% from December’s revised 427,000, and 2.2% year-on-year. The increase was attributed to a 10.4% surge in the South, the largest region for new home sales. The median sales price for new houses sold in January 2014 came in at $260,100 with the average sales price at $322,800. The seasonally adjusted estimate of new houses for sale at the end of January was 184,000, or a supply of 4.7 months at the current selling pace. This was down from the 5.0-month supply last month due to the sales increase.
To read about the impact of the new home sales indicator as well as another relevant release issued this week that’s likely to impact fixed income markets, move on to Part 8 of this series.