New Home Sales and Home Prices Surge According to Latest Data

Andrew Klips  |

The Commerce Department said Tuesday that purchases of new homes in the U.S. leapt ahead by 15.6 percent in January from December to a seasonally adjusted 437,000 annual pace, blowing economist predictions of a 380,000 annualized rate out of the water and showing that the nation’s housing market is accelerating its recovery.

The climb puts new home sales, which are counted when contracts are signed, at the highest level since July 2008. In January 2012, the annual rate was about 29 percent lower at 339,000.

The report, a joint effort between the U.S. Census Bureau and the Department of Housing and Urban Development, also showed that the median sales price of new houses sold in January was $226,400 and the average price was $286,300.

Seasonally adjusted, the number of new houses for sales at the end of January was only 150,000, representing only 4.1 months worth of inventory at the current pace of sales. That’s the lowest supply ratio since March 2005.

Earlier today, Case-Shiller reported that its S&P/Case-Shiller home price index for December notched its biggest year-over-year gains since mid-2006. The 20-city composite index of home prices rose a non-seasonally adjusted 0.2 percent for the month, after a contraction of 0.1 percent in November. Seasonally adjusted, the index surged 0.9 percent. Economists were expecting a 0.5 percent increase.

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Compared to December 2011, home prices were up 6.8 percent, the largest increase since July 2006. Every city in the index, except for New York City, posted increases for the month.

"The overall picture is very, very strong,” said David Blitzer, Chairman of the S&P 500 Index Committee, on CNBC’s “Squawk on the Street” Tuesday morning. “All across the country things look good and only one city out of 20 was down on a year-to-year basis.”

Last week, the National Association of Realtors reported that sales of pre-owned homes, called “existing home sales,” rose by 0.4 percent in January to a seasonally adjusted 4.92 million annual rate. Inventories in that category have shriveled to 1.74 million homes, the lowest stock in about 14 years.

The jobs market, while not fantastic, has remained steady for more than one year. Coupled with dwindling inventories now at 13-year lows, the price of new homes and the pace at which they are being purchased is steady growing. Moderating happiness, however, is the fact that sales are still far, far below the 700,000 annualized rate that economists consider indicative of a “healthy” economy and market.

After taking a lashing on Monday, the markets are generally responding favorable to the housing data, although slipping from highs as the morning wears on. The Dow Jones is ahead by 55 points and the S&P 500 is up by 1 point, although the Nasdaq is down 2 points, fueled in part by Apple, Inc. (AAPL) doffing-off nearly another percent a little more than one hour into the session.

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