WHAT IS New Home Sales
New Homes Sales are an economic indicator measuring sales of newly built homes. A new home sale is considered to be any deposit or contract signing either in the year the house was built or the year after it was built. The Department of Commerce's Census Bureau releases New Home Sales reports that include both quantity and price statistics. People view new home sales as a lagging indicator of market demand, and as a factor affecting mortgage rates.
BREAKING DOWN New Home Sales
New Home Sales reports also serve as good indicators of economic turning points. Generally, when economic conditions slow down, the New Home Sales report serves as an early indicator of such a depression. Because a wealth of new home sales trigger consumer confidence and spending, the release of data can have significant impact on the real estate market.
The U.S. Census Bureau provides national and regional data on the number of new single-family houses sold and for sale. It also provides national data on median and average prices, the number of houses sold and for sale by stage of construction, and other statistics. The data are from the Survey of Construction (SOC), which the Department of Housing and Urban Development (HUD) partially funds. Each month the U.S. Census Bureau publishes preliminary estimates of new single-family houses sold to provide government and private data-users with early measures of new residential sales activity. Revisions, as well as the seasonally adjusted annual rate, are released after monthly estimates.
Interpretation of New Homes Sales
Financial reporters report on New Home Sales data and often provide broader interpretation for readers following market news. For instance, the Wall Street Journal (WSJ) reported on New Home Sales data from in March 2018 showing that new-home sales surged, a strong end to a strong first quarter. Purchases of newly built single-family homes increased 4% from the prior month to a seasonally adjusted annual rate of 694,000 in March. Economists can interpret the data from New Home Sales in a number of ways. For example, in WSJ's reportage, Mark Vitner, a senior economist at Wells Fargo, points to the increase being in part due to millennials aging into homeownership. And when reporting that new-home sales in the West were particularly strong, growing over 28% in March and posting the best annual sales rate in more than a decade, the reporter pointed out that less robust Northeast sales could be due to harsh weather in the region.