US New Home Sales Increase

Sales of new US homes in rose in February with broad gains around the country, while the median sales prices rebounded after falling in the prior month, the government reported Friday.

The positive surprise comes amid other signs the US economy is slowing, but housing data is notoriously volatile. The report also showed January sales were much higher than originally report, while figures for December and November were lower.

Interesting from @tylercowen that flips round the traditional argument home ownership is good because home owners are incentivised to improve their city. If housing supply can't increase, any improvements just mean higher rents and are thus disincentivised https://t.co/KHd6U5SU23

— Ant Breach (@AntBreach) March 27, 2019

Sales of newly-constructed single-family homes rose 0.6 percent compared to February 2018 to an annual rate of 667,000, seasonally adjusted, the highest since March of last year, the Commerce Department reported.

The sales pace was nearly five percent higher than the prior month, while sales in January, which originally showed a steep decline, were revised to show a solid increase.

Economist Jim O’Sullivan of High Frequency Economics cautions that the many revisions are “limiting the information value of a single report.” However, the average for the first two months of the year at 652,000 has improved on the pace in the prior two quarters, he said in a research note.

REUTERS/Steve Dipao

Real estate industry data released earlier this month showed sales of existing home also surged in February, while mortgage applications have been rising in recent months. “A robust rebound is underway, tracking mortgage demand,” said Ian Shepherdson of Pantheon Macroeconomics.

The Commerce Department data showed there were 340,000 new homes still on the market at the end of last month, which is 6.1 months’ supply at the current sales pace.

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With interest rates falling and supplies rising, a sales pickup could reverse last year’s slowdown, which had caused analysts to worry growth in the US economy had peaked.

Shepherdson said he expects housing to boost growth in the first half of the year, however, he cautioned that the 2017 tax reform, which capped mortgage deductions “appears to have caused chaos in the existing home market” in high-tax states.