New Home Sales Strong in February
- New Home Sales increased by 6.1 percent to a 592,000 unit annual rate.
- Existing Home Sales fell by 3.7 percent in February to a 5,480,000 unit annual rate.
- Initial Claims for Unemployment Insurance gained 15,000 for the week ending March 18, to hit 258,000.
Tight supply, higher prices and high mortgage rates are constraining the market for existing homes and fostering strong demand for new homes. Mortgage rates ticked up at the end of December, consistent with expectations of tighter Federal Reserve monetary policy this year. The Fed raised the fed funds rate range on March 15 by 25 basis points to 0.75-to-1.00 percent. According to the Freddie Mac mortgage market survey, the commitment rate on a 30-year fixed-rate mortgage increased again for the week of March 16, to 4.30 percent, and then eased to 4.23 percent for the week of March 23.
Existing home sales fell in February by 3.7 percent to hit a 5,480,000 unit annual rate. Sales fell most in the Northeast, down 13.8 percent for the month. The Midwest was down 7 percent. The West lost 3.1 percent while sales in the South increased by 1.3 percent. With weaker sales, very tight inventories increased a bit, to a still tight 3.8 months of supply at the February sales rate. The median sales price of an existing home was up 7.7 percent in February over the previous 12 months according to the National Association of Realtors.
New home sales were better than expected in February, increasing by 6.1 percent to a 592,000 unit annual rate. This is the second best monthly sales figure since the end of the Great Recession. It shows a continuation of the upward trend in new home sales that began in 2011. New home sales in the Northeast dropped by 21.4 percent in February. However, the Midwest saw a 30.9 percent increase. The West gained 7.5 percent and the South was up 3.6 percent. The months’ supply of available new homes for purchase decreased marginally to 5.4 months’ worth. The median sale price of a new home was down by 4.9 percent in February from 12 months earlier. This does not reflect weakness in the market. Rather, it shows a shift toward more affordable homes by builders and it also reflects the changing geographic mix of homes sold.
Initial claims for unemployment insurance for the week ending March 18 increased by 15,000, to hit 258,000, which is still a very low number. Continuing claims for the week ending March 11 fell by 39,000, to hit an even 2 million. Continuing claims look like they are leveling out near the late-cycle lows of 1988 and 2000.
Market Reaction: U.S. equity markets opened with gains. The 10-year Treasury bond yield is up to 2.41 percent. NYMEX crude oil is down to $47.85/barrel. Natural gas futures are up to $3.10/mmbtu.
For a PDF version of this Comerica Economic Alert click here: New_Home_Sales_0323017.