new home

New-home sales remain at a six-year high

By Yasufumi Saito

U.S. new-home sales in January almost held the high level in more than six years, showing a modest upbeat in the housing market that exceeded Wall Street’s estimate.

(U.S. Department of Commerce, U.S. Census Bureau, Yasufumi Saito/Medill)

Sales of newly built, single-family homes decreased 0.2 percent to a seasonally adjusted annual rate of 481,000 from 482,000 in December, which was the strongest since June 2008, but were up 5.3 percent from a year ago, the U.S. Census Bureau and the Commerce Department reported Wednesday.

The estimate compiled by Bloomberg L.P. was 470,000.

“This is a positive sign in the housing sector,” said Michael Englund, chief economist at Action Economics LLC. “New-home sales in January tend to be depressed due to winter weather, but it’s holding almost the same pace in December despite the recent drop of existing home sales.”

In general, historically low mortgage rates and upward employment situations trigger an incentive for people to buy a house. But Englund dissented this time, pointing out that the application activity for home mortgages is quite low.

“People are buying houses with cash, not by using mortgages,” he said. “What we see now is that people who have enough disposable cash buy expensive houses. This is why the median sales price has been increasing rapidly.”

The median sales price in January was $294,300, up 9.1 percent from a year ago.

Mortgage applications fell 3.5 percent in the week ended Feb. 20, standing at its lowest level since the week ended Jan. 2, the Mortgage Bankers Association reported Wednesday. The average interest rate for 30-year fixed-rate mortgage was 3.99 percent in the week, up 6 basis points from the previous week.

New home sale :Regional breakdown
Regional breakdown of new home sale (Yasufumi Saito/ Medill)

There is a discrepancy among regions. Sales in the Midwest rose 19.2 percent, while the Northeast saw a 51.6 percent plunge. The South, the biggest region in the new-home market, experienced a 2.2 percent increase, whereas the West saw a 0.8 percent decrease.

By contrast, other data showed a lagged recovery in the housing market. Existing home sales in January fell 4.9 percent to an annual rate of 4.82 million units from a month earlier, the lowest level in nine months, according to a report Monday from National Association of Realtors.

New-home sales account for less than 10 percent of the housing markets as home resale is much larger in the U.S. But new-home sales are still seen as a barometer of economic trend, and the change in median sales price on a year-over-year basis tends to indicate inflation in the housing sector.

Photo at top: A new house for sale (Dave Delnea/Creative Commons)