US new home sales hit an 11-month high in February as revised mortgage rates increase affordability and allow new buyers to enter the market. January figures were revised higher.
Key Takeaways
- Sales rose 4.9% in February to a rate of 667,000 vs 2.1% expected.
- Sales for new homes reached the highest level since March 2018.
- January figures were revised from 607,000 to 636,000.
The Commerce Department reported a 4.9% increase in the sale of new homes which can be be volatile on a monthly basis and rose 0.6% annually. With the rate of 30-year fixed mortgages hitting yearly lows and under at 4.06% last week from 4.28% the week before, the cost of entering the housing market has decreased.
Wage gains are also beginning to outpace growth in home prices which has slowed. New home sales is component of housing particularly responsive to mortgage rate changes at an early stage as it is drawn from permits.
The Federal Reserve has been signaling a pause in interest rate hikes for 2019 and perhaps beyond in the face of the ongoing trade war, tame inflation pressures, Brexit, and other economic risk factors.
However, land and labor shortages continue to impact housing, and the trade war has also made lumber more expensive. Homebuilding investment dipped 0.3% in 2018, the biggest drop since 2010. Housing plays a major role in GDP, and analysts are now wondering whether the industry is finally beginning to pick up.
New Home sales are all that matters for GDP contribution and they are back to a healthy clip and should make new post GFC highs in Q2 as mortgage rates have plunged. Will be a strong tailwind for Q2 growth and employment and even a bit in Q1... pic.twitter.com/N46tKJRvOh
— FxMacro (@fxmacro) March 29, 2019
Regional Data
In the South, where most houses are sold, sales jumped 1.8% in February to the highest level since July 2007. Sales in the Northeast climbed 26.9% and 28.3% in the Midwest, with no change in the West. The median house price dropped 3.6% to $315,300 in February on an annual basis with 340,000 new homes added to the market last month, down 0.6% from the prior month.
The current sales pace would clear inventories in 6.1 months, down from 6.5 months in January.
The housing market shows signs of recovery after an exceptionally poor year, but is still considered to be struggling and heavily reliant on a strong labor market.
Market Reaction
Gold price has seen little reaction to the news, continuing to tick downward from earlier in the session. Gold last traded at $1,295.07/oz, up 0.41% after climbing as high as $1,299.61/oz to test resistance. The precious metal saw a session low of $1,287.21/oz.
June Gold Futures last traded at $1,299.30/oz, up 0.31%.
Gold Price Chart
More articles from Conor Maloney
