Thanks to the government's aggressive efforts to free up mortgage lending, February may prove to have been the month that the housing sector started to move up from the bottom. New home sales, like existing home sales on Monday, proved better than expected, at a 337,000 million unit annual rate. January, at 322,000, and December, at 371,000, were both revised higher by a net 40,000. The month-to-month gain is a sizable 4.7 percent with the year-on-year rate a bit less cataclysmic than prior months at -41.1 percent. Supply on the market fell to 12.2 months from 12.9 months, still quite swollen but at least an improvement.
Unlike prices for existing homes, prices on the new home side are not improving at least yet with the median price down another 2.9 percent in the month to $200,900. The year-on-year deteriorated further, now at -18.1 percent. But price declines on the new home side are less critical than for existing homes, where lower prices are driving out marginal homeowners.
This morning's mortgage application data from the Mortgage Bankers Association showed striking improvement, and together with this week's home sales data are certain to increase investor appetite for risk. There was no significant reaction to the new home sales report at least initially, but the gain, like Monday's gain for existing home sales, could feed an afternoon rally in the stock market.
Market Consensus before announcement
New home sales in January plunged a monthly 10.2 percent to a record low pace of 309,000 annualized units sold. Prices for new homes also continued to decline under the weight of excess supply and little traffic. The median price for a new home fell a very steep 9.9 percent in January to $201,100, pulling down the year-on-year rate to minus 13.5 percent. The supply of new homes on the market jumped to 13.3 months from 12.2 months in December. Looking ahead, lower mortgage rates may help slow the fall in sales. But homebuyer traffic in January and February was very low, according to the National Association of Homebuilders.