New Home Sales Sink 3.3 Percent in February

Andrew Klips |

Americans purchased new homes at the slowest pace in five months during February, another sign that inclement weather conditions took a toll on the economy at the start of 2014. Lending to the sluggishness in the housing market, January’s figure also was revised significantly lower than originally estimated, although an upward revision to December’s figure helped counterbalance the decline.

The Commerce Department said on Tuesday that new home sales, a measure of signed contracts to buy a newly built home (not the number of closings, as for existing home sales), slid by 3.3 percent to an annualized rate of 440,000 from a 445,000 pace in January, marking the slowest pace since September. The February report was a little worse than the 442,000 economists predicted.

Meanwhile, January’s number was revised down from the original estimate of a 468,000 annualized rate based upon a more complete set of data. The original estimate for January represented a five-year high for new home sales. The downward revision still was the best in one year. December’s figure was increased by 14,000 to 441,000.

Compared to February 2013, sales were off by 1.1 percent.

The frigid cold and snowy conditions that blanketed large swaths of the United States this winter has caused economists to pause and consider some soft economic reports from the last three months. At this point, it’s difficult to discern if there are some underlying problems that go deeper than just Mother Nature, including interest rates hikes that began last May and the rising cost of a new (or existing) home.

The median sales price of new houses sold in February 2014 was $261,800, according to the Commerce Department report.  The average sales price was $317,500.

The S&P/Case-Shiller 20-City Home Price Index was also delivered on Tuesday, which showed that prices rose 13.2 percent in January, compared to a year earlier.

The seasonally adjusted estimate of new houses for sale at the end of February was 189,000. This represented a supply of 5.2 months at the current sales rate. The tight inventory has some housing pundits forecasting that pent-up demand with low supply leaves a lot of upside to new home sales going forward. The inventory may still be below the 6-month level that economists regard as a healthy market, but, at the same time, February’s new house stockpile is the most in 25 months.

Typically, the housing markets gains steam in the spring as the warmer weather starts setting in and families look to make changes while kids are on summer vacation.

From a regional perspective, annualized sales increased only in the Midwest during February, rising to 67,000 from 49,000 in January. Sales in the South dipped from 259,000 to 255,000; from 113,000 to 95,000 in the West and from 34,000 to 24,000 in the Northeast.

Wall Street is taking the report with a grain of salt. As mentioned, the vote is not in yet on the impact of the weather and there seems to be bullish sentiment that the housing market will soon be back on the path to recovery. The Dow Jones Industrial Average is ahead by 120 points, the S&P 500 is up 9 points and the Nasdaq has risen 9 points with 2-1/2 hours left in the trading day.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


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