The Mortgage Corner
New home sales shot 6.1 percent higher in February to a 592,000 annualized rate that easily beats the Econoday consensus for 565,000 and is near the top estimate of 600,000. Sales seemed to have a boost from builder concessions as the median price fell a monthly 3.9 percent to $296,200 and down 4.9 percent year-on-year.
Strength is centered in the Midwest where the sales rate surged 21,000 to 89,000 and easily surpassing 11,000 gains for the both the West, at 157,000, and the South at 313,000. Sales in the Northeast fell sharply in yesterday’s existing home sales report and are down 9,000 to a very low 33,000 annualized rate in today’s report.
“February’s increase in new home sales is consistent with builders’ growing confidence in the housing market,” said Granger MacDonald, chairman of the National Association of Home Builders (NAHB). “Builders are encouraged by heightened consumer activity and by the expectation that regulatory costs will decline in the year ahead.”
And mortgage rates have continued to fall of late in the face of pessimism that Trump’s campaign promises, including tax cuts and infrastructure investments, might not be enacted anytime soon. The 30-year fixed conforming rate has dropped to 3.75 percent for 1 origination point.
In fact, House Speaker Paul Ryan has admitted the infrastucture may not come up for a vote until 2018, and any tax reductions seem to be dependent on repeal of Obamacare, which now has even more opposition as Repubs keep eliminating more benefits to please their Libertarian Freedom Caucus members.
This is while existing home sales were down 3.7 percent in February to a 5.480 million annualized rate, also below the Econoday consensus for 5.555 million. Details are mostly weak including a 3.0 percent decline for single-family sales to a 4.890 million rate and a sharp 9.2 percent drop for condos to a 590,000 rate.
But we have just ended the winter season, and year-on-year, single-family sales are up 5.8 percent with condos fading and barely over zero at 1.7 percent. Overall year-on-year sales are up a solid 5.4 percent with the median price of $228,400 up a healthy 7.7 percent. Supply has been very thin but is improving, with 1.750 million resales on the market for a 4.2 percent gain from January.
But existing-home inventories are very low at 3.8 months vs January’s 3.5 months. Days on the market are very short, at 45 vs 59 days a year ago. This means there is no housing inventory in many parts of the country, so the surge in new-home construction should continue as homebuilders race to fulfill the rising demand for housing.
Harlan Green © 2017
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