Monday, April 25, 2011

U.S. New Homes Sales Jump 11.1% In March

Several economic measures have indicated that March was not a good month for the U.S. economy. But, sales of new homes is not one of them. According to the U.S. Commerce Department, new-home sales rose 11.1% last month. Although a nice improvement, it plays off against a dismal February - but it was well above expectations.
“With March sales gaining in every region except the South, the data are another reminder that activity readings in January/February were restrained by severe weather. Builder sentiment data and mortgage purchase applications have shown no collapse or subsequent surge,” said Steven Wieting, an economist at Citi.

But by region, sales are between 9.1% and 34% worse than the same period last year. The still-high unemployment rate, a glut of cheaper existing homes on the market and the large number of underwater mortgages have all combined to depress the market for new homes.

“Distressed sales continue to rob demand from new home sales and construction activity,” said Yelena Shulyatyeva, an economist at BNP Paribas.
Adding to the not-so-rosy cast to this figure is the fact that the average sale price fell 3.8% from a year ago, although it rose 2.9% from February's revised figure. Inventories, though, shrunk to their lowest level since 1967.

It makes for a mixed report, whose bright spots are treated skeptically by the associated article. Evident is a two-tier market, where new-home sales recover while used-home sales languish. That's a healthy development, because it signifies the house returning to its old-time status as a durable consumer good rather than a speculation vehicle. For durable consumer goods, new is better than used.

The gold market seemed to take a little heart from the news after tumbling to the low 1500s at 9:45. That tumble was prompted by a recovery in the greenback. Sadly, the bump-up at the time of the figures' release proved to be only a relief rally. Gold has another stumble to go before it bottomed at $1,502. Needless to say, earlier support at $1,510 has evaporated.


  1. Daniel, as usual another good post, I believe home sales up 11% adds additional optimism to the markets encouraging more to get long. I don’t think the market is going to move any where significantly up or down until the debt ceiling vote is made, that’s the 600lb gorilla keeping the markets on edge. I have a delta of +24; I may consider looking to get closer to delta neutral in preparation for a severe sell off if it does occur. The debt ceiling vote will take place sometime around May 16th, definitely no later than July 8th.


  2. Thanks, Trin. Given the assertiveness of the Republican House, there'll almost certainly be linkage. The debt-ceiling raise will be part of another bill.

    The gold market's gotten nervous over the Fed. Will the stock market get nervous too? Not so far: it opened up slightly. Still, the time to hedge is when the sun shines.