5 Interesting Takeaways From the New Home Sales Report

by Peter Thomas Ricci

March 26, 2014

Everyone is reporting on February’s new home sales numbers, but what broader trends do the numbers reveal?

You’ve surely seen the headlines by now: the sales of newly built single-family homes in February fell 3.3 percent from January, and were down 1.1 percent from Feb. 2013, according to the Census Bureau.

That’s the second straight month of yearly declines, though median price and average price were both up by yearly measures, rising 6 and 1.2 percent, respectively.

Again, those are the oft-repeated numbers, there were other, more interesting takeaways from the Census Bureau’s latest numbers. Here are five of them:

1. Inventory is Rising – The for-sale inventory of new homes is on the rise, with February’s 5.2-months supply a 10 percent rise from January and a 18 percent rise from Feb. 2013. Though this is good for the overall market, it may mean builders have less of an advantage.

2. What Weather? – Yes, we know, this most recent winter was abominable, but interestingly, we can’t really blame the weather for February’s drop in sales. As Trulia’s Jed Kolko noted, new home sales were actually up in the Midwest, but they fell in the relatively toasty West.

3. Comparisons Prove Tricky – That 1.1 percent yearly decline may seem discouraging, but when we put recent new home sales data into perspective, the portrait becomes much murkier. As Bill McBride noted on Calculated Risk, new home sales in January and February of 2013 posted 28 percent yearly increases! So, 2013’s leap may be distorting the present data.

4. Cash is NOT King – All-cash sales have remained quite prominent in the existing-home market, but they made up just 7 percent of all sales in 2013; that’s relatively high compared to previous years, but still pretty low.

5. We’re Still Out of Whack – Finally, new home sales still have some catching up to do with existing-home sales. The historical ratio between existing and new is 6:1, but as of February, the ratio was still an outsized 10:1, what with distressed home sales and the nation’s high vacancy rate/weak housing starts.