December new home sales surged well over the high end Econoday estimate.
The outlook for the housing sector just got a boost from a sharp jump in new home sales, up 10.8 percent to a 544,000 annualized rate that is 44,000 over the Econoday consensus and 24,000 over the high estimate. The gain, however, may have been boosted by discounting as the median price slipped 2.7 percent to $288,900 for a year-on-year rate of minus 4.3 percent.
With builders slow to bring new homes to market, low supply remains a central factor holding back sales. Supply did rise 6,000 in the month to 237,000 but supply relative to sales fell back to 5.2 months from 5.6 months. A reading of 6.0 months is considered to be the balance point between supply and demand.
Regional data show a 32 percent sales surge in the Midwest where the year-on-year rate of 39 percent is the strongest. Sales in the West and Northeast both rose 21 percent in the month with the year-on-year rate in the West, which is a key region for new housing, up 22 percent while the Northeast, which is a very small region in this report, down 6.5 percent on the year. The South, which is the largest region, shows a fractional gain in the month and no change on the year.
For full year 2015, new home sales rose 14.7 percent to 501,000 from 437,000 in 2014. Sales of new homes have been noticeably higher than prices, suggesting that prices have room to accelerate. This report follows special strength in existing home sales with both perhaps benefiting from December’s warm weather but with both pointing nevertheless to new momentum for 2016.
Negative Momentum
Why did sales surge 39% in the Midwest? Because this was one of the warmest December on record even discounting global warming silliness.
Bloomberg calls this “new momentum” for 2016. Indeed it is, but that momentum is negative.
This statement by Bloomberg caught my eye: “Sales of new homes have been noticeably higher than prices, suggesting that prices have room to accelerate.“
Prices Have Room to Fall
I suggest home prices have room to fall. Curiously so does Bloomberg, albeit in different ways, and in a different article.
Please consider Bloomberg’s article The Surge in U.S. Mansion Prices Is Now Over, published just two days ago.
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