May 23, 2017 – New single-family home sales represent the number of brand new houses that were purchased or committed to being purchased over the course of a month. This indicator has a trickle-down effect as demand rises for durable goods and consumer spending increases, boosting GDP. It is also a sign of strength in the consumer balance sheet to make the investment.
New home sales declined 11.4% in April to a 569,000 annualized rate, compared to March’s revised 642,000. This came in well below expectations of an annualized rate of 602,000. The median price fell 3.0% for the month to $309,200. Year-over-year prices are down 3.8% while sales are up only 0.5%. Sales fell in the Northeast, Midwest, and South and declined the most in the West. The months’ supply of new homes increased to 5.7 months from 4.9 months.
Investors should not be worried about the decrease in new home sales, given that housing figures fluctuate frequently on a month-to-month basis and March saw a solid upward revision. Shown in the graph, new home sales have been fairly consistent over the last 12 months with a few volatile movements. A decline of 11.4% might seem like a hefty fall but following a post recovery high in March, this decrease is just the markets way of correcting itself. While the large decrease will be a factor into other economic indicators such as demand for durable goods and construction spending, the decline of one month does not create a trend and is not something to be concerned about. We believe new home sales will continue upwards over the next few months.