The United States Census Bureau released its New Home Sales report on Friday last week and it showed that sales of new single-family homes increased by 7.2% in the month of January. This was higher than expectations and the highest level in nearly a year. The biggest contributor to this gain was a surge in new home purchases in the south. Even though this was a good jump from December, new home sales are still down 19.4% year over year. It should be noted that New Home Sales measures signed contracts, not closings on new homes.
Inventory of new homes on the market decreased by 2.9% to 439,000, which represents a supply of 7.9 months at the current pace of sales, which is down from 8.7 months in December. However, out of the 439,000, only 73,000, or 17% were completed homes. When looking at the pace of sales versus homes that were completed there is only a 1.3-month worth of supply. The median new home price decreased by 8.2% to $427,500.
This New Home Sales report was on the heels of the National Association of Home Builders Housing Market Index that showed growing optimism by way of home builders. The HMI was released at 42, showing that confidence is growing from builders since it is a gain from the prior report which was at 35. In this report, there are three components which all rose sharply. Present market conditions rose 6 points to 46, future outlook rose 11 points to 48 and prospective buyer traffic rose 6 points to 29. Even though the index and these components are in a contraction level, being below 50, there is clearly a rebound and they are moving in the right direction.
Overall, there seems to be some growing confidence in new home construction as seen in the New Home Sales report and the NAHB Housing Market Index which hopefully can add some more homes to the housing inventory and optimism to the housing industry.
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