By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

Sign up to receive an email as pertinent data are released.

February New Home Sales Show a Winter Surge

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.

Sales and Starts of New, Single-Family Homes
New Family Homes Sales Chart
Source: Census Bureau. As of 28 Feb 15

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 40 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.

Sign up to receive an email as pertinent data are released.

© Western Asset Management Company 2017. This publication is the property of Western Asset Management Company and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. Investments are not guaranteed and you may lose money. This publication is for informational purposes only and reflects the current opinions of Western Asset Management. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset Management may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence. Potential investors in emerging markets should be aware that investment in these markets can involve a higher degree of risk. Any forecast, projection or target is there to provide you with an indication only and is not guaranteed in any way.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorised and regulated by Comissão de Valores Mobiliários and Banco Central do Brasil. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered financial instruments dealer whose business is investment advisory or agency business, investment management, and Type II Financial Instruments Dealing business with the registration number KLFB (FID) No. 427, and members of JIAA (membership number 011-01319) and JITA. Western Asset Management Company Limited (“WAMCL”) is authorised and regulated by the Financial Conduct Authority (“FCA”). In the UK this communication is a financial promotion solely intended for professional clients as defined in the FCA Handbook and has been approved by WAMCL.