April 25th, 2016 10:44 am | by John Jansen |

Via Millan Mulraine at TDSecurities:

US:  New Home Sales Stumbles, Unexpectedly

  • The pace of new home sales dropped in March, falling 1.5% m/m versus the market consensus for a modest 1.6% m/m gain, marking the third consecutive monthly decline in this indicator.
  • The sharp downward revisions to the February’s estimate, from +2.0% m/m to -0.4% m/m also added to the sour tone of this report.
  • The overall tone of this report was disappointing, suggesting continued weakness in this segment of the US economy.

New home sales declined unexpectedly in March, with the pace of sales activity falling 1.5% m/m in March to 511K units, marking the third consecutive monthly decline in this indicator. The disappointing performance contrasts with the market expectation for a modest 1.6% m/m gain to 520K units, and the downward revisions to February’s estimate (from +2.0% m/m to -0.4% m/m) suggested that this segment of the economy will likely be a source of drag on US economic activity. Note, however, that total net revisions were +23K, owing to the upward revision to January’s estimate. Despite this, the 3M average dropped to 517K units from 526K units.

The regional performance were somewhat mixed, with sales higher in the Midwest (up 18.5% m/m) and the South (up 5.0% m/m). Sales were flat in the Northeast. However, overall sales activity was drag lower by the 23.6% m/m plunge in the West. And with the sharp drop in sales activity, the month’s supply of unsold homes rose to 5.8 months to 5.6 months, as the number of homes available for sales rose 2% m/m to 246K from 241K.

The overall tone of this report was disappointing, and the rise in inventories at a time when sales activity is slowing suggests that the dynamics in this segment of the housing sector is moving in the wrong direction. Granted, this remains a very small part of the US housing market and the series is generally quite volatile and subject to massive revisions. Nevertheless, given the supply constraints in existing home sales the weak tone in this report provides a sobering take on the housing sector recovery.

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