February New Home Sales Pull-Back

New home sales undershot estimates in February with a -18.2% pull-back to a 775k pace, though this followed 77k in upward revisions that offset the downside February surprise to leave total sales that were roughly in line with assumptions.

We saw rates of a 948k (was 923k) 3-month high in January, 919k (was 885k) in December and 857k (was 839k) in November. Despite the February drop, the last nine sales rates are the highest since a 1,016k reading in September of 2006, with a peak of 979k last July.

Sales fell in all four regions, with little skewing toward harsh weather areas. We saw declines of -37.5% in the midwest, -16.4% in the west, -14.7% in the south, and -11.6% in the northeast.

The housing market is even stronger than sales indicate, given the dramatic inventory plunge to record lows through late-2020 before a small 2021 bounce. We are also seeing counter-seasonal price firmness through the winter months that is capping sales.

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Home inventories rose 2.6% to 312k from 304k (was 307k), versus a 3-year low of 285k in October and August, leaving a -4.6% y/y drop.

The months’ supply of homes rose to 4.8 from 3.8 (was 4.0) in January, versus a 3.5 all-time low last August and October that was also seen in 2003 and 1998.

The median price fell -1.1% to $349,400, after $11,300 in upward revisions that left a $356,600 (was $353,100) all-time high in December. We saw a 5.3% y/y February rise despite the monthly pull-back, as prices fluctuate well above the pre-September all-time high of $343,400 in November of 2017.

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Bottomline

Rising mortgage rates, soaring construction material prices, adverse weather, and the Texas freeze all sharply depressed the February housing data. We expect a sharp housing sector bounce in March and April as the weather distortions are reversed, though rising prices with capacity constraints, and higher rates with fiscal stimulus, will continue to restrain the boom.

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