Thursday, January 29, 2015

Snow kidding: New home sales surge

Economics in a nutshell: You know all those stories about the weather hurting the housing market, forget them - maybe.

Snow kidding: New home sales surge

In this Thursday, Jan. 9. 2014, photo, a sold sale sign hangs in front of a house in Mount Lebanon, Pa. The Commerce Department releases new home sales for January on Wednesday, Feb. 26, 2014. (AP Photo/Gene J. Puskar)
In this Thursday, Jan. 9. 2014, photo, a sold sale sign hangs in front of a house in Mount Lebanon, Pa. The Commerce Department releases new home sales for January on Wednesday, Feb. 26, 2014. (AP Photo/Gene J. Puskar)

INDICATOR: January New Home Sales

KEY DATA: Sales: up 9.6%; Prices (Year-over-Year): +3.4%

IN A NUTSHELL: "You know all those stories about the weather hurting the housing market, forget them - maybe."

WHAT IT MEANS: Okay, I am totally confused. The builders are saying that the housing market has tanked. The National Association of Home Builders' Index crashed and burned in February, declining by ten points - the largest change, up or down, in the nineteen year history of the index. Mortgage applications are faltering dropping to their lowest level in nearly two decades, according to the Mortgage Bankers Association. So, with that as a background what do we discover? New Homes soared in January to their highest level since July 2008. Confused? Me too! There was a sharp drop in demand in the Midwest (subzero temperatures tend to do that) but that was more than offset by an amazing 74% rise in the Northeast. I live in the Northeast. I didn't go out in January. I have no idea how to explain that. Actually, I do. What I didn't understand was the total collapse in new home sales in the Northeast in December, so maybe the rise, which simply put the region's sales pace back to where it had been, should have been expected. So, if weather hurt the Midwest and odd data led to the sharp increase in the Northeast, how do you explain the double-digit gains in the South and West? Maybe, the housing market is really in good shape and when the better weather returns, so will sales in the cold-weather sectors of the nation. As for prices, they were up modestly over the year but inventories remain limited so I expect we could start seeing some improvement in prices going forward.

MARKETS AND FED POLICY IMPLICATIONS: This is one of those "you tell me and we both know" reports. It was great to see that new home sales soared in January and I hope that continues, but given all the other numbers, this one seems awfully strange. Still, it was good news and it does seem to be supported by the consumer confidence numbers, which are not that bad. Also, that there was a large sales rise in the warmer weather states seems to point to some underlying strength in housing that may be hidden by temporary factors. I'm trying to be optimistic. I am looking out my window at a major snow burst and getting depressed. But, there is light at the end of the tunnel. I am headed down to Clearwater for my annual father/son Phillies spring training trip next week so I can 'think July' even if it is still February. Anyway, it is hard not to like this report, which is how investors, Fed members and anyone who is hoping for a better economy will likely view it.

About this blog
Joel L. Naroff is the president and founder of Naroff Economic Advisors, a strategic economic consulting firm in Bucks County. He advises companies across the country on the risks and opportunities that economic developments may have on the organization’s operating environment. An accomplished public speaker, Joel’s humor and unique ability to make economics understandable have brought him a wide following. Reach Joel at joel@naroffeconomics.com .

Joel Naroff
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