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New Home Sales: Strong Rebound As Supply Remains Low

March 23, 2017

Bottom Line: New home sales rose more than expected in February. Sales over the last three months have averaged 560K, 0.9% below the six month average of 565K. The months supply dropped modestly as sales rose more than inventories. New home prices continued to climb relative to their year ago levels. While existing home sales yesterday showed weakness, the trend towards low supply but steady growth in housing activity continues. This new home sales data (based on contract signings rather than closings like existing home sales reports) reveals potential strength going forward.

New Home Sales ROSE by 6.1% to 592k, after the prior month was revised higher to 558k. This compared with market expectations for an increase to 564k, from the unrevised January level of 555k. Sales are now 12.8% ABOVE their year ago level, -- but they are still 57.4% BELOW their July 2005 peak.

The Inventory of Homes Available for Sale ROSE by 1.5% to 266k. Inventories are now 9.9% ABOVE their year ago level but still 53.5% BELOW their July 2006 peak level.

Combined with the increase in sales, the Months' Supply dropped to 5.4 months from 5.6 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 were MIXED with median prices 4.9% BELOW their year ago level and with average prices 11.7% ABOVE their year ago level.

Article by Contingent Macro Advisors