The new home sales report for the month of March will be released today. The data measures the number of single-family homes that were sold during the period.
According to the economists polled, new home sales are forecast to show 647 million units sold during the month.
This would reflect in about a 3% decline from February’s figures. In February, new home sales rose by 4.9%. Despite the modest dip, the overall trend remains steady. The data comes as last week, building permits and housing starts report came out. Both the data sets showed a decline in March.
New Home Sales Rebound in February
Sales of new homes surged in February to rise at the best pace in nearly a year. This was largely due to lower mortgage costs. Single-family home sales rose by 667,000 from the previous month on an annual rate.
In January, single-family home sales saw an upward revision to 637,000. February’s report showed that median sales prices fell by 3.6% making it somewhat more affordable to own homes.
February’s new home sales report comes after the data turned weak in the previous months. The rebound was due to a cut in mortgage rates since December. Last year, new home sales fell as home buyers were concerned about higher mortgage rates.
This was at a time when the Federal Reserve was aggressively hiking interest rates. But that has changed ever since the March Fed meeting. Central bank officials have pledged to keep rates unchanged for the rest of the year.
A direct result of this was reflected by the rise in new home sales figures. There were also significant discounts offered during the period which added to the rebound in the sale of new single-family units.
New home sales initially fell 6.9% comparing to December 2018 figures but the overall trend over the past few months has remained in an upward trajectory.
Expectations Show a Moderation from February’s Surge
With economists projecting that new home sales rose 647 million, it reflects the view that following the surge in February, there could be a moderation. But with interest rates now likely to be unchanged, the morale among home buyers could certainly increase. Given the fact that data remains volatile, we could see some significant revisions to the previous month’s data. But this shouldn’t see any adverse revisions, especially to the downside.
Recent reports from the consumer sideshow that optimism among US consumers remains high. Inflation has been quite stable, and this is likely to further add to the view that interest rates will remain unchanged for quite a while.
Investors will, however, look to the upcoming data. Ever since the Federal Reserve pledged to keep rates unchanged, the markets have bounced back. This has given rise to some Fed officials talking about pushing rates higher if the economic growth allows for it.
The labor market also remains robust. Unemployment data for March saw a rebound after the dismal print from February. With the US unemployment rate holding steady near decade lows, we expect to see an improvement in new home sales over the next few months.
This was evident from the recent retail sales report which saw US consumer spending surging after a bleak start to the year. This has reignited optimism that the US economy is most likely in a Goldilocks phase of stable inflation and interest rates while the economy is growing steadily.
What Will be the Impact of the Report on the USD?
There won’t be any immediate impact on the USD as this week will see a lot of high ticket items. The economic docket this week will see the advance GDP report and the durable goods orders report coming out. However, the new home sales report will be able to shift the underlying expectations of the US economy.