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Here’s the good news behind the volatile new-home sales data

February revised higher

New-home sales, despite being adjusted up and down on a regular basis, continued a slow, upward trajectory in March.

Sales of new single-family houses in March 2016 were at a seasonally adjusted annual rate of 511,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.

This is 1.5% below the revised February rate of 519,000, but up 5.4% from the March 2015 estimate of 485,000.

In addition, the median sales price of new houses sold in March 2016 hit $288,000, while the average sales price reached $356,200.

Looking past the core numbers, Trulia Chief Economist Ralph McLaughlin explained in his analysis that while new home sales in March were down month-over-month, the 12-month rolling total continues to looks solid.

McLaughlin cautioned that new home sales numbers from the U.S. Census are extremely volatile: the margin of error is wide and often includes zero, which means we can't be certain whether these month-over-month or year-over-year changes actually increased, decreased, or stayed flat.

Instead, McLaughlin pointed to the 12-year rolling total, which is up 8.9% year-over-year but flat month-over-month.

“This reflects a steady increase in demand from homebuyers as well as increasing confidence of homebuilders," he said.

However, he continued, "There are two caveats on today’s solid numbers. First, the year-over-year increase is down from 9.7% last month, and is the smallest increase over the past year. Second, new home sales still remain about 24% below the 50-year average."

Zillow Chief Economist Svenja Gudell echoed similar concerns on the numbers. “March home sales continued the inconsistent, up-and-down trend we've been seeing for months now: Existing sales were up, while new home sales were down, a pattern we have seen in nine of the past 13 months,” Gudell said.

“In some good news for new homebuyers, the number of new homes for sale nationwide reached the highest level since 2009 and was up in all regions covered, while new home prices fell to their lowest level since 2014,” she said.

Gudell touched on regional new home sales saying, “So far this year, much of the softness in national new home sales numbers has been driven by weakness in the West region. In both January and March, new home sales in the West fell more than 20% month-over-month. Some, but not all, of this slack has been picked up in other areas of the country: Over the year, new home sales are down 20.7% in the West, but up 15.4% in the South. The West region is home to some of the nation's priciest and fastest-growing housing markets, and continued weakness could indicate some fatigue among homebuyers who need a breather from breakneck appreciation.”

Lindsey Piegza, the chief Economist at Stifel Fixed Income, echoed that sentiment of relative caution on the latest new home sales data.

“New home sales unexpectedly declined in March, led by the weakest sales pace in the West since July 2014,” Piegza said. 

“The longer-term declining trend across topline sales since the start of the year, however, suggests a more broad-based decline in construction activity during one of the sector’s busiest seasons of the year,” Piegza continued. 

“While construction activity has been positing limited activity as of late, with still-low borrowing costs and relatively positive employment trends, the housing market is, nevertheless, well positioned to continue to positively contribute to headline GDP growth amid a positive, albeit it modest, pace of recovery,” Piegza added. 

“In other words, the housing sector remains a welcome support to an otherwise fragile economy; however, unlike the run-up leading into the Great Recession, the housing market will no longer be the driver of the economy with a positive but limited contribution,” Piegza concluded. 

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