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