There’s a lot of handwringing over today’s SHOCKING February home sales number, which showed that sales of new homes had fallen to levels not seen since the Kennedy administration.
In truth, it wasn’t that much of a shock. A 250K annualized rate vs a 280K annualized rate is not big, and it basically means it came in right in line with what people were expected.
But it’s also obvious that it was a weather issue.
The above chart looks at new home sales over the past few months by region. Look closely and you’ll see that the West and South have significantly outperformed the North and Midwest, which had famously horrible Winters. So, rejoice! Things are bad, but they’re not quite as bad as you think.
Ticonderoga Securities has more:
New Home Sales at 250K declined a stunning 16.9% from the revised 301K in January. On an apples-to-apples basis compared to the unrevised 284K in January, the drop was 12%. As we wrote in our preview piece yesterday, a miss compared to the 290K consensus was to be expected given inclement weather last month. Given that the latter half of February is only the beginning of the selling season, we are not overly concerned about today’s metric. Should we see the same type of result in March, certainly we will be much concerned. That said, we expect March results to be improved given our field research and the fact that it is quarter-end for most builders. While the equities were hit on the news, we expect them to recover as investors realise the ambiguity in today’s data.
We note that Not Seasonally Adjusted (NSA) sales were flat sequentially in the West and South, which given the weather should be considered a minor victory. Year-over-year, however, NSA sales dropped 29% in the West and 15% in the South, illustrating the negative impact from the loss of last year’s tax credit.
On a regional basis, all areas declined. We believe the 57% decline in the Northeast and 27% drop in the Midwest illustrates the weather’s negative impact. Sales in the important South declined 6.3%, while the West dropped 14.7%.
Update: Interestingly, the big homebuilders ETF has now gone green on the day.
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