The housing sector is probably moving forward right now but not very quickly or very much. Yesterday's existing home sales report showed a dip in March with today's new home sales report showing a rise but one that's lower than expected. New home sales rose 1.5 percent in March in an easy comparison with an unusually weak month in February. The annual sales rate at 417,000 is 2,000 shy of the Econoday consensus.
Low supply, the result of tight credit and supply chain constraints in the residential construction sector, continues to hold down sales. The number of homes on the market did rise but only by a slight 3,000 to 153,000, and the gain isn't enough to improve the month's supply which is unchanged at 4.4 months. This level of supply is consistent with a strong housing market such as the big bubble days of 2005, not with a slow market like today.
Curiously, price data in this report fell sharply in the month, down 6.8 percent for the median to $247,000. The year-on-year gain is only 3.0 percent, well down from the mid-teens through the second half of last year. The weak price readings likely reflect the composition of sales, specifically higher sales of lower priced homes. In any case, these readings conflict with wide signals of price strength including today's FHFA report and price details in yesterday's existing home sales report.
Regional details show rising strength in the Northeast which however is by far the smallest region for new home sales. But the largest region, the South, also shows strength. Sales dipped in the Midwest and West.
Today's report has stopped the Dow's opening rally in its tracks. The spring season, beginning with this month, will really be the big test for the housing market which going into the season isn't showing much momentum.
Market Consensus before announcement
New home sales in February declined 4.6 percent to an annualized pace of 411,000. But this followed a strong 13.1 percent jump in January. Sales were up 12.3 percent on a year-ago basis. Importantly, seasonal factors are large for winter months and volatility is common over these months. One modest positive was a rise in houses for sale to 152,000 from 150,000 in January. The combination of a dip in sales and rise in supply put months' supply at 4.4 months, compared to 4.2 months in January. Low supply recently has been constraining sales.