The November new home sales data from the U.S. Census Bureau includes "some surprisingly positive data points, and a continued divergence from the weekly purchasing applications trend as released by the MBA," according to research from Compass Point Research & Trading.

Wilkes Graham and Ryan Gilbert at Compass Point say purchasing applications, which are usually a solid predictor of new home sales, are now down 11% year over year, and the divergence between purchasing applications and new home sales trends seems to be widening.

The difference is relatively simple, economists say. While MBA studies the entire universe of mortgage applications each week  — including refis and purchase applications — the Census data is limited to just new home sales. New home sales only make up a small portion of what MBA studies in its survey of purchase applications.

Below is their chart — original is available here.

"We explain this divergence as either an unusually high mix of new home sales rather than existing home sales among buyers or a sign that new home sales in the coming months will be due for a correction," the two said in a paper released earlier this week.

Michael Frantantoni, chief economist at the Mortgage Bankers Association, said the divergence, as such, isn’t quite so wide as the Commerce Department data suggests.

"What we’ve seen is that purchasing applications for the first half of the year were up 10% over the same period last year and for the last six months they were down 10% from what they were over the same period last year," Frantantoni added. "They are heavily influence by the existing home market. New home sales are only small portion of the market."

The two charts below show their data.

Frantantoni said that MBA’s new builder application survey is a survey of applications from mortgage companies tied to homebuilders, and is therefore more accurate. It shows applications and new home sales tracking more closely.


Overall, new home sales took a slight downturn on the heels of a very good year.

November new home sales totaled 464,000, while October new home sales were revised upward to 474,000.

Home sales should increase across the board in 2014 but not all will perform equally in 2014. Sales of new homes are expected to rise faster than sales of existing homes, which make up a larger share of the market, in part due to changes to mortgage lending rules.

Frantantoni said he expects new home sales to be up as much as 10% over 2013 totals.

The National Association of Home Builders likewise is optimistic about sales of new single-family homes.

Meanwhile, sales of existing homes should hit about 5.14 million in 2014, up from an annualized rate of 4.9 million in November, according to the National Association of Realtors. Existing-home sales averaged a bit more than a rate of 6 million over the five years leading up to 2005’s peak.