New-home sales rebound in January as demand solidifies

Dive Brief:

New single-family home sales in January rose 3.7% from December's adjusted rate of 535,000 to a seasonally adjusted annual rate of 555,000, the Commerce Department reported Friday. The rate is 5.5% above the year-ago estimate of 526,000.
January's figures came in below analyst expectations, with economists polled by MarketWatch calling for an annual rate of 586,000 sales.
The median sales price of new houses sold in January was $312,900, down from $322,500 in December and $305,400 in November. The supply of new homes dipped marginally to 5.7 months in January from 5.8 months in December.

Dive Insight:

January's report follows a downturn in December that had industry observers concerned that tight inventory conditions were stymying growth. Despite month-to-month volatility in the market, observers are hopeful that the uptick in new-home sales could signal a solid start to 2017.

Inventory, however, remains an issue. Existing-home sales were ahead 3.3% on a monthly basis and 3.8% year-over-year in January, while for-sale stock in that category fell for the 20th-consecutive month. For its part, new single-family construction is coming back online, albeit slowly. The category inched up 1.9% in January to an annualized rate of 823,000 starts and was 6.2% of the year-ago period, according to the latest figures from the Commerce Department.

Still, a shortage of lots and labor, rising mortgage rates and elevated home prices are the counterweight on forecasts of growth in the residential construction sector. Builder confidence lagged for a second-straight month, according to the National Association of Home Builders/Wells Fargo Housing Market Index, though economists say the measure is moving back into a sustainable range following a post-election surge.

As for activity in the coming months, industry observers look to a recent uptick in building permit authorizations to bring confidence back to the market. With January's slight rise in authorizations and new single-family construction, economists project that 2017's slow start could turn around.

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