Headlines covering the Census' release of new home sales data clamored of a "sharp" fall, and the data top line seems to support that view.
Here, the Wall Street Journal's Eric Morath whose "U.S. New-Home Sales Fell Sharply in January" concludes that the " latest reading is another sour note for the economy early this year."
Here, Reuters compares the actual vs. the expected figures to dramatic effect in "New home sales hit 494,000 in January, versus 520,000 estimate," a story whose key take-away is that new home sales have cooled even as the housing market improves due to jobs growth and household formations.
National Association of Home Builders economist David Crowe talks of a "Pause" in January.
But wait a minute. Wasn't 2016 to be a year of solid growth in new home sales? Doesn't the talk-track run along the lines that an increase in community counts, and the push among builders into the lower price tiers for new home neighborhoods would increase order volume, perhaps at the expense of margins, and same-store sales pace?
How do these actual figures for January reconcile with that talk-track? Or, have the Chinese economic convulsions and the oil glut that have so riled Wall Street and energy-centric local economics really begun to insinuate themselves more broadly and deeply into housing's still tentative recovery narrative?
Probably going to have to wait a couple of months to say for sure.
Let's look at a couple of conditions, factors, and considerations about the January 2016 new home sales data for what may be a helpful assessment, starting maybe with the observation that Census Bureau data for new home sales runs noisy on a month to month basis, so as Trulia chief economist Ralph McLaughlin notes, a more reliable data read is the 12-month rolling total. McLaughlin points out that that figure shows a recovery on solid footing through the first month of January.
Secondly, as some of the gloom-and-doom stories indicate, the wall of worry in new home sales trends for January is steepest in the West, where sales fell 32.1% sequentially, the weather--3 inches above-normal precipitation pattern for the region--may have contributed to below normal traffic and orders.
Too, as Calculated Risk's Bill McBride notes, the January to January comp from this year to last is an especially tough one insofar as 2015 got off to a rocking start on the new home sales front (before new lending rules and economic headwinds started to mess with the mojo).
McBride continues to call for growth in 2016 NHS, but at a much more conservative level than most analysts in the sector (his post here predicts 4% to 8% growth in NHS for 2016, vs. the 14% actual increase that occurred in 2015).
Then again, let's take up just a couple more considerations.
One, as conditions got tougher during the fall months into December last year, what was the operational response to the headwinds as they built resistance to a slam-dunk rebound? Sales incentives.
We're guessing that with plans to open lots of new communities this Spring (i.e. now), there were some pretty strong imperatives among companies finishing out 2015 to move inventory as aggressively as possible. We can see here, order growth for the fourth quarter across a healthy set of big builders was a relatively strong (nearly 12%).
What this suggests is that builders (especially big ones) had their pedal to the metal to wind up 2015, and have been focusing on more strategic programs supporting their new community openings in the first part of this year.
What this may suggest is that, as McBride notes, February 2016 may also look as if it's shadowed by its 2015 February comp, but after that, as the new neighborhoods grand open and start meeting the obvious need in the market for stronger, lower-priced for-sale supply, the momentum should shift to the positive.
We're hearing that even in the beleaguered Houston market, homes priced in the below-$400,000 range are still selling strong, while the second-time move up homes are where the resistance points are highest.
When that lower price offering becomes part of a housing plot line that, right now, says that there's nothing much available in good resales for entry level and first time buyers, we'll see the comps start to jump over year-earlier benchmarks.
Singly, the most important data point in yesterday's report is on new home median prices. NAHB's Crowe notes:
The median sales price dropped 4.5% to $278,800 due to an increase in sales of homes between $150,000 and $199,999. Increases in relatively affordable homes is a sign that the first time buyer is finally creeping back into the home buying market.
Importantly, the "low hanging fruit" leg of recovery is over.
Big boy pants time.