US new home sales jump to a near-year high – what does it mean?

YEREVAN (CoinChapter.com) – The latest Commerce Department report shows a much-anticipated turnaround could be near as the contract signings for new home sales jumped 7.2% month-over-month to an annualized rate of 670,000, the highest level since March 2022.

The single-family house prices blew up with the rising inflation in the post-Covid market and have been the biggest casualty of the Federal Reserve’s aggressive interest rate hikes. So, is the market showing signs of a turnaround?

New home sales pick up in 2023

In detail, the experts forecasted an uptick in new home sales and pegged the target at 620,000 units, but the January data exceeded expectations. New home sales are generally counted at the signing of a contract and are considered a leading housing market indicator. On a regional basis, sales surged in the South but slumped in the Midwest, Northeast, and West.

It might be too soon to celebrate, as the year-over-year data still shows a 19.4% decline in January. However, the sales of existing homes fell moderately, indicating that the worst is likely over, evoking a “raising cautious optimism.”

Also read: European Central Bank and Bank of England’s Anti-Inflation Measures Risk Recession Havoc.

Existing home contracts are still on decline, but builders’ confidence rising.

Experts assume that it will still be a while before the housing market turns the corner. Mortgage rates have resumed their upward trend after robust retail sales and labor market data, as well as strong monthly inflation readings, raised the prospect of the Federal Reserve maintaining its interest rate hiking campaign through summer.

Meanwhile, existing home sales fell 0.7% to a seasonally adjusted annual rate of 4.00 million units in January. That’s the lowest level since October 2010. Hence, Jan 2023 marked the 12th straight monthly decline in sales, the longest such stretch since 1999.

Despite the harsh conditions, homebuilder sentiment in February rose, which is a hopeful sign for the housing market turnaround.

According to the National Association of Home Builders, and the Wells Fargo Housing Market Index, homebuilder confidence in the market for newly-built single-family homes in February rose 7 points to 42. Notably, anything below 50 is considered negative. But the overall sentiment has seen a positive spin after falling to 31 in December. Still, the confidence index stood at 81 on Fed 2022.

Also read: US President Joe Biden’s student loan forgiveness plan could face a stiff challenge at the Supreme Court.

At the individual level, roughly 65% of occupied housing units are owner-occupied, according to Congressional Research Service. Homes are often a substantial source of household wealth in the United States. Plus, housing construction provides widespread employment. At the aggregate level, housing accounts for a significant portion of all economic activity, and changes in the housing market can have broader effects on the economy.