Dip in new home sales merely a bump in market’s recovery road: economists

New home sales
New home sales fell below analyst expectations in January, according to data released Wednesday. (Photo: AAG/Creative Commons)

By Steven Porter

New home sales fell short of expectations in January, but economists remain confident the housing market’s recovery will continue bit by bit.

Single-family houses sold at a seasonally adjusted annual rate of 494,000 last month, 9.2 percent below the 544,000 economists surveyed by Yahoo Finance had been expecting,  according to a report  released Wednesday by the U.S. Department of Commerce.

Daniel Silver, an economist with JPMorgan Chase Bank, said the shortfall announcement shouldn’t be seen as a bad omen.

“The series on new home sales is often choppy, but through some of the noise in the data, it appears that home sales are continuing to trend higher over time off of historically low levels,” Silver said in a prepared statement. “We maintain our view that the housing market will continue to recover.”

New home sales since January 2015

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The seasonally adjusted annual rate of new single-family home sales (in thousands) per month dipped in January 2016. (Source: U.S. Department of Commerce)

Broken down by region, sales dropped modestly in the South and the Midwest, which saw decreases of 1.8 and 5.9 percent respectively. The Northeast, meanwhile, saw a sales increase of 3.4 percent.

But the West, where new home sales were down 32.1 percent last month, dragged down the national average. Still, the announcement isn’t a cause for alarm, according to economists with Comerica Bank.

“A scan of California realtor news reveals nothing exceptional for the month,” Comerica Chief Economist Robert Dye wrote Wednesday. “So we will view this as an anomaly for now, and expect new home sales to rebound next month.”

Nationwide, the median sales price of a new home was $278,800 in January, and the average was $365,700, according to the Census and HUD data released Wednesday. At the end of the last month, there was a seasonally adjusted estimate of 238,000 new houses for sale, representing a 5.8-month supply at the current sales rate.

Separately, the Mortgage Bankers Association released survey data Wednesday indicating that applications for mortgages declined as well.

For the week ended Feb. 19, applications were down 4.3 percent on a seasonally adjusted basis, compared to a week prior, according to the MBA data, which were adjusted to account for business missed on President’s Day.

Mortgages sought for purchases fell 2 percent, while mortgages sought for refinancing purposes fell 8 percent compared to the previous week, according to MBA’s indices.

The share of mortgage activity sought for refinancing purposes decreased to 61 percent from 64 percent a week prior.

Mortgage applications by purpose (%)

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The share of mortgage applications requested for refinancing declined about 3 percentage points in week ended Feb. 19, from the previous week. (Source: Mortgage Bankers Association)

“Following six straight weeks where rates declined a total of almost 40 basis points, rates ticked up slightly last week, causing some pull back in refinance activity,” MBA Chief Economist Mike Fratantoni said in a prepared statement.

Photo at top: New home sales fell below analyst expectations in January, according to data released Wednesday. (Photo: AAG/Creative Commons)