U.S. Home Sales: Are We Just Celebrating California?
Last week’s release of December new home sales (which are recorded as contracts signed to purchase a home) showed that sales jumped by 17.5% m/m, following in the wake of the strong existing home sales report, which showed home resales jumping 12.3% m/m. Looking more closely at the data, the gain was driven by the West region where sales jumped by 72%. Sales were modestly higher in the South and Midwest, while sales in the Northeast fell back. Previously, the existing home sales report, which counts home sales as contracts closed on a home, was positive across regions, but showed the biggest monthly jump in the West region, in both November and December. Meanwhile, the pending home sales report, which is based on contracts signed and leads existing home sales by a month or two, rose 16.9% in November, before collapsing by 13.2% m/m in the West in December.
As one of our favorite economists, David Rosenberg, has pointed out, the jumps in the home sales data driven by the West region in late 2010 can be traced to an extended version of the first-time homebuyer tax credit in California, which expired in December. As these distortions clear in early 2011, home sales data should continue to show some stabilization, and move on a sideways trajectory, as we do not envisage a near-term resurgence in housing demand. Indeed, in the week ending January 21, applications for mortgages weakened to the lowest level since October.
New and Existing Home Sales in the West Region
Source: National Association of Realtors and U.S. Census Bureau via Bloomberg
Editor’s Note: This post is excerpted from a much longer analysis available exclusively to RGE Clients:North America Focus: Parsing U.S. Q4 GDP; Rate Hikes Unlikely for Canada
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