US New Home Sales: January's overshoot is not all that surprising – Wells Fargo


New Home Sales in the US rose above expectations during January. Analysts at Wells Fargo point out sales were also revised higher for the past three months. They point out new home sales easily beat consensus estimates and January's overshoot is not all that surprising as sales are extremely volatile on a monthly basis and seasonal factors often play an outsized role during the winter months. 

Key Quotes: 

“New home sales rose 4.3% to a 923,000-unit pace in January, coming in well-above market expectations. Not only did new home sales rise more than expected, but revisions to the prior three months data significantly raised the base that sales increased from. The data now show a 5.5% increase to an 885,000-unit pace in December. For all of 2020, new home sales rose 19.3% to an 815,000 units. New home sales averaged 882,333 units over the past three months, which is 8.3% above the 2020 total.”

“Even though the seasonal adjustment process appears to have exaggerated the extent of January's rise in new home sales, there is little doubt that new home sales remain quite strong. The strength in sales closely aligns with the recent NAHB/Wells Fargo Home Builders' survey, which reported strong sales over the past few months.”

“New home sales have benefited from the accelerated migration away from large, expensive urban areas to lower cost suburbs and secondary metro areas.”

“We expect new home sales to moderate in February and March. While home builder confidence remains strong, February brought a return of winter weather to much of the country and unusually harsh conditions to Texas, which is the nation's largest new home market.”

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