January New Home Sales Maintain December Pace


Despite some analysts’ expectations of a monthly decline, the rate of new home sales in January maintained the gains reported in the December report. Combined with upward revisions, the effectively flat monthly change from December to January keeps new home sales near post-recession highs.

According to estimates from the joint Census Bureau and HUD release, the January pace of new single-family home sales stood at a 481,000 seasonally adjusted annual rate. This was down a negligible 0.2% from the 482,000 pace for December, which marked the highest rate since the Great Recession.

The January 2015 pace was 5.3% higher than the sales rate recorded in January 2014. Total inventory was 218,000 (seasonally adjusted), marking a 5.4 months’ supply at the current sales rate.

new home sales_jan 15

Because the monthly new home sales estimates possess a large statistical confidence interval, it is useful to gauge trends using a three-month moving average (the red line in the graph above). On that basis, new home sales have been trending upward since the middle of 2014.

This is consistent with the NAHB/Wells Fargo Housing Market Index, a measure of single-family builder confidence. The HMI has been in positive territory (above a level of 50) for the last eight months.

According to Census/HUD estimates, inventory continues to rise gradually as the residential construction market recovers. Total new home inventory came in at 216,000 in January (non-seasonally adjusted). Of that total, 40,000 were homes that have not begun construction, 116,000 were currently under construction, and just 60,000 were completed, ready-to-occupy residences.

With respect to sales prices, there were gains over December for sales in the $150,000 to $300,000 range, as well as well as the $400,000 to $750,000 class. As first-time buyers enter the market, sales growth should occur in the lower price ranges of the new home sales market.

Regionally, the January report noted a significant decline in new home sales for the Northeast, falling from a 31,000 annual rate in December to 15,000 in January. This decline was certainly due to weather impacts.

Overall, while the headline numbers suggest a flat report, given that the gains recorded in December were maintained despite a regional decline in the Northeast, the January report marks a positive sales pace to build on in 2015.



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