By the Numbers
Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.
The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.
New-home sales showed a very strong 7.9% gain in February, on top of upward revisions to January data. As seen in the accompanying chart (red line), these gains put new-home sales firmly above the prevailing levels of 2014. In fact, the recent increases bring new-home sales to levels consistent with those of late-2014 single-family housing starts (blue line).
This is an important counter to last week’s news on February housing starts, wherein single-family starts dropped precipitously. While that decline was commonly blamed on severe winter weather, we focused on the fact that the February 2014 starts decline looked eerily similar to what occurred in early-2014, following a late-2013 surge.
The January 2014 plunge in starts was also originally blamed on the weather. Yet, when spring set in, housing starts remained around the levels of January 2014, indicating that it was the November/December 2013 levels that were the anomaly, not those of January 2014.
We were suspicious that a similar pattern would emerge this year—that there was more to the February 2015 starts decline than just severe weather. However, today’s news of soaring new-home sales contradicts that suspicion. With February new-home sales levels consistent with the starts levels of late-2014, there is reason to expect this spring to show a full rebound in starts.
What does it all mean? Well, recall that in our last installment of By the Numbers, we stated that manufacturing activity has been softening lately. Softening manufacturing and stagnant homebuilding would have meant a net slowing in overall GDP growth. Instead, the better new-home sales data preserve the hope that stronger homebuilding will offset softer manufacturing, leaving GDP growth on net in the 2.0%–2.5% channel we have been forecasting. On net, then, today’s housing news should quell any fears of slowing US growth, but it doesn’t quite point to an improving growth picture.
Michael BazdarichProduct Specialist/Economist
Mike brings more than 43 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.
Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.
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