New home sales rose sharply in January, defying expectations for a drop-off due to harsh winter weather in much of the country.
Sales jumped to their highest level in more than five years, and were up 9.6% from December, to hit a seasonally adjusted annual rate of 468,000 last month, the Commerce Department said Wednesday.
December sales were revised upward to an annual rate of 427,000 from 414,000 previously reported.
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The figures were the best news in months for the housing market. Its recovery from the recession-era bust has lost some momentum due to sharp gains in home prices early in 2013, increased mortgage rates last year and a rough winter blamed for affecting both home buyers and builders in parts of the country.
The latest reports on existing home sales, pending home sales, housing starts and home builder confidence were all weaker, which is why various economists’ forecasts for new home sales anticipated a drop in the January sales rate.
But economists reacted cautiously to Wednesday’s report because new home sales figures can be volatile. January’s numbers could be revised downward in coming months, as October’s and November’s previously reported figures were this month, said Richard Moody, chief economist of Regions Financial Corp.
Diane Swonk, chief economist of Mesirow Financial, observed that new home sales are a small portion of the overall housing market, and they remain very weak for a late-stage economic recovery.
“We will need to see a lot more volume in construction to have a meaningful impact on employment, especially for low-skilled workers who had seen their wages boosted a bit from the rise in construction employment during the housing market boom,” she said.
Joel Naroff, of Naroff Economic Advisors, called the report great to to see but “awfully strange,” given other weak economic data.
New home sales fell 17% in the Midwest while surging 74% in the Northeast, one of the regions most affected by January’s extreme weather. In the South, sales rose 10% and in the West, 11%.
Still, Naroff noted, the report appears to be supported by consumer confidence numbers, which are “not that bad.” Last month’s large rise in new home sales in warmer states suggests underlying strength in housing that may be hidden by temporary factors, he said.
The median price of new homes sold in January was $260,100, down 2.2% from December’s $265,900 and November’s $269,200.
Inventories of new homes for sale are lean, which could put upward pressure on prices in coming months. There was a 4.7-month supply at January’s sales rate; a six-month supply is considered a balanced market between buyers and sellers.
Courtesy of USA Today