"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

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Tuesday, May 24, 2011

New Home Sales

This is a little late, but it's worth it.
New Home Sales (technically, New Residential Sales) is exactly what it sounds like on the box - a seasonally adjusted look at the annual rate of sales of newly constructed residential buildings.  Keep in mind that this is an annual rate - if we're showing sales at (say) 250,000 that means that in the past rolling year 250,000 new homes have been sold.
But enough lecturing on methodology.  Let's get to why you (or, indeed, anyone) should care.  In this case, it's all about the trickle-down effect.  New home sales typically mean new mortgages, which means that banks and mortgage brokers are doing business.  New home sales also lead to durable goods sales - furniture, appliances, home entertainment systems, gardening and lawn care equipment, all those lovely economy-driving big ticket items - and to less durable but still important goods sales (paint, carpet, lightbulbs, and so on and so forth).  Home sales are economic force multipliers, and increases in new home sales are an economic reason to party.
For April, the Econoday-surveyed analysts aren't expecting much of a party.  March annual sales came in at 300,000, and they're expecting the exact same thing for April - and while slow and steady may win the race[1], it doesn't impress the markets much.
But that's just the opinion of some analysts.  For actual data, we turn to the joint press release from the US Census Bureau and the US Department of Housing and Urban Development, which shows us that sales of new one-family houses in April 2011 were at a seasonally adjusted annual rate of 323,000, beating expectations by 7.6%.  The median sale price was $217,900 and the average sales price was $268,900.  The Bureau and Department also estimate there are 175,000 new homes for sale as of the end of April, giving us a 6.5 month supply at current sales rates.
So there you go, a nice hefty slice of "beating expectations".
[1]  A saying apparently created by someone who has never actually been in a race.

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