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New Home Sales: Sharp Declines But Regional Considerations

January 26, 2017

Bottom Line: New home sales fell sharply more than expected in December. While this correlated with a sharp increase in mortgage rates, the geographical distributions of the declines reveal that weather was likely a factor in this surprise miss. The Midwest and South saw a decline of a combined 75k units, while sales in the the West and Northeast were unchanged to higher. The 90% confidence interval for this data is +/- 12.2% and even with this month's 10% decline the longer-term averages suggest the trend remains positive. 2016 closed with an average of 561k units compared to 502k in 2015 and 440k in 2014. Nonetheless, the trend bears watching as the spring selling season develops.

New Home Sales FELL by 10.4% to 536k, after the prior month was revised higher to 598k. This compared with market expectations for a decline to 588k, from the unrevised November level of 592k. Sales are now 0.4% BELOW their year ago level. But they are still 61.4% BELOW their July 2005 peak.

The Inventory of Homes Available for Sale ROSE by 4.0% to 259k. Inventories are now 10.2% ABOVE their year ago level but still 54.7% BELOW their July 2006 peak level.

Combined with the decline in sales, the Months' Supply increased to 5.8 months from 5.0 months. This is modestly BELOW a normal level of 6.0 months and well BELOW its peak of 12.2 in January 2009.

Home Prices ROSE with median prices 7.9% ABOVE their year ago level and with average prices 7.2% ABOVE their year ago level.

Article by Contingent Macro Advisors