Just when it appeared that all of the economic news would continue to be dour, the Commerce Department earlier this morning reported that sales of new homes had ticked up by 9.6% in January, rising to 468,000 homes on an annualized basis. That was up from an upwardly revised 427,000 homes sold in December. Initially, the December figure had been estimated at 414,000 homes. Expectations for January had been just 401,000 houses sold.
Behind this surprising jump was an outsized gain in the Northeast, the smallest of the four regions, where sales jumped by 73.7%. In the Midwest, by comparison, sales fell by 17.2%. This is the second smallest of the four regions. The South, the largest of the locales, saw sales rise by 10.4%, while they climbed 11.0% in the West.
It should be noted that home sales are less sensitive to the weather than actual building; by comparison, housing starts, the most sensitive of the housing categories, had plunged by 16% last month. We expect further weakness in February in that area of the market.
As to sales prices, they fell on a median basis, easing from December's $265,900 to $260,100 in January. However, on an average count, they increased, jumping to $322,800 during January from $308,800 in December. This was the highest average price for a new home since November.
Also, it should be noted, that inventories of unsold properties remained very low, coming in at just a 4.7-month supply in January; in December, the unsold inventory level had been 5.2 months.
Obviously, this was an encouraging report, especially in this critical sector, which has seen material weakness in recent months. Much of the earlier falloff in housing has been attributed to the weather, and this is a logical conclusion, given that harsh weather, as underscored by abnormally cold temperatures and major snowstorms, cannot only delay construction, but also dissuade potential buyers from venturing forth.
Overall, though, in spite of the recent wrinkles, the housing market remains in a secular recovery of some note. To wit, home prices last year posted their largest annual gain since 2005, albeit from somewhat depressed levels. Indeed, rising mortgage rates and higher home prices could prompt some buyers to move quickly this year, thereby providing a further lift to this market once the spring thaw arrives.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.