New Home Sales: Sharp Jump Aided By Weather, Trend Positive

February 26, 2020
Bottom Line: Amid unseasonably nice weather in parts of the country, new home sales jumped more than expected in January, confirming the steady increase in mortgage applications over the month. Sales were stronger in the Midwest and Northeast, likely due to weather, but also saw a strong increase in the West. Nationwide average prices jumped, eclipsing 400k mostly due to the higher mix of sales in the more expensive West (the median price rose to $348k). Inventories fell slightly, pulling months supply back down to 5.1 months, indicating the market remains tight. Overall, the trend is positive for housing. Separately, refis were steady in the latest week -- but this was before the big drop in rates this week -- and purchase activity was modestly higher. New Home Sales ROSE by 7.9% to 764k, after the prior month was revised higher to 697k. This compared with market expectations for an increase to 730k, from the unrevised December level of 694k. Sales are now 18.6% ABOVE their year ago level, -- but they are still 45.0% BELOW their July 2005 peak. The Inventory of Homes Available for Sale ROSE by 0.3% to 324k. Inventories are now 6.6% BELOW their year ago level but still 43.4% BELOW their July 2006 peak level. Combined with the increase in sales, the Months' Supply dropped to 5.1 months from 5.5 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 14.0% ABOVE their year ago level and with average prices 11.4% ABOVE their year ago level. The MBA Mortgage Applications Index ROSE by 1.5% during the week ended February 21 to 655.0, sharply above its 13 week average of 573.6 and 70.2% ABOVE its year-ago level. The Purchase Index ROSE by 5.7% to 273.1, slightly below its 13 week average of 274.4 but 10.6% ABOVE its year-ago level. The Refinance Index FELL by 0.8% to 2,853. With this decline, refinancing activity is sharply above its 13 week average of 2,322 and 151.6% ABOVE its year-ago level. Contract Mortgage Rates FELL with the 30-year fixed rate declining by 4 bps to 3.73% and the 15-year fixed rate declining by 4 bps to 3.18%.