Do New Home Sales Freeze Weather-Related Excuses?
The real estate market finally received some good news: sales of new single-family homes in the United States last month reached their best level in over five years. However, there is more doubt than ever that weather alone is responsible for the recent weakness seen in other reports.
On Wednesday, the U.S. Census Bureau reported that purchases of new homes, measured by contracts signed, jumped 9.6 percent to a seasonally adjusted 468,000-unit pace in January, compared to the upwardly revised December rate of 427,000 units. Home sales were up 2.2 percent from January 2013, but as the chart above shows, the housing market is still far below its glory days.
The results were better-than-expected. On average, economists estimated home sales to come in at a 400,000-unit pace. This was a pleasant surprise since last month’s report was the biggest miss of expectations since July 2013. The rise in January also breaks a two-month losing streak for new home sales. A total of 428,000 single-family homes were sold in 2013 — the best year since 2008.
While the frigid winter in parts of the country has been blamed for weak housing reports this month, new home sales in the most hard-hit regions do not confirm this thinking. Sales in the Northeast surged 73.7 percent to an annual pace of 33,000 units, marking a seven-month high. Sales in the South jumped 10.4 percent to a more than five-year high. These two regions have felt the brunt of the infamous polar vortex.
Last week, the National Association of Realtors announced that total existing-home sales – which are completed transactions of single-family homes, town homes, condos, and co-ops — dropped 5.1 percent to a seasonally adjusted annual rate of 4.62 million units in January, which was worse than expected by economists. Lawrence Yun, chief economist at the NAR, mentioned the cold weather but also said that, “We can’t ignore the ongoing headwinds of tight credit, limited inventory, higher prices, and higher mortgage interest rates. These issues will hinder home sales activity until the positive factors of job growth and new supply from higher housing starts begin to make an impact.”
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