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New Home Sales: March Declines Harbinger Of April Slump

April 23, 2020

Bottom Line: New home sales fell sharply in March as sales in the Northeast and West fell over 38%. The South, where shutdowns didn't start until April in many cases, saw only a small decline. April will likely see sharp declines in that region too, as most other areas see further, more modest declines. The housing market was accelerating much more than other segments before the shutdowns for the novel coronavirus. Housing is not the source of economic stress that it was in the last financial crisis. While many potential homebuyers have been financially challenged and won't be able to stay in the housing market, those potential buyers who have held onto their jobs will benefit from low mortgage rates and more supply when markets open again.

New Home Sales FELL by 15.4% to 627k, after the prior month was revised lower to 741k. This compared with market expectations for a decline to 644k, from the unrevised February level of 765k.

Sales are now 9.5% BELOW their year-ago level, -- but they are still 54.9% BELOW their July 2005 peak.

The Inventory of Homes Available for Sale ROSE by 2.8% to 333k. Inventories are now 1.2% BELOW their year-ago level but still 41.8% BELOW their July 2006 peak level.

Combined with the decline in sales, the Months' Supply increased to 6.4 months from 5.2 months. This is modestly ABOVE a normal level of 6.0 months and well BELOW its peak of 12.2 in January 2009.

Home Prices ROSE with median prices 3.5% ABOVE their year-ago level and with average prices 0.7% ABOVE their year-ago level.

Article by Contingent Macro Advisors