Monday, February 26, 2018

January housing: on new home sales, curb the Doom!

 - by New Deal democrat

With the release of New Home Sales, we have a more complete look at the status of housing in January.

Two months ago, I suggested that you restrain your enthusiasm for a blowout number to the upside. Today, the opposite is also the case: ignore the Doomers' inevitable gloom about a big disappointment to the downside.

First of all, let's put single family home sales in context. Below are new home sales (blue), single family permits (red), and single family starts (green) since their bottom in 2010:

In case it isn't clear from that longer term look at the trend, here is the last 18 months:

With a few pauses along the way (most of 2014 and 2017) due to temporary increases in interest rates, housing has plodded along at about 5% gains per year. This is most clear from single family permits, which are the least volatile measure of the three.

Because of their great volatility, new home sales are best viewed as a 3 month moving average. Here they are only down slightly (644k) from their expansion high one month ago (650k).

Meanwhile, median prices also declined this month, but the increasing trend is intact.

Let's also compare with January's housing permits (red) and starts (green) for all types of housing:

Here again the pause for most of 2017 with the recent new expansion highs are plainly visible.

Going forward, I certainly expect the recent spike in interest rates to again take a bite out of sales as, sooner or later, will increased prices. As in 2014 and 2017, it will be a few months before it shows up in this data.  But for now, despite the downside new home sales number today, the recent positive trend in housing is still intact.