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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 Explode in April...First Real Gains in a Year

New-home sales rose explosively in April, up 16.6% on top of a March level that was revised upward almost 3.9%. Those two changes brought April new-home sales levels to 619,000 units per year. As seen in the accompanying chart, that level is about consistent with the April single-family starts level of 778,000 (the 159,000 unit difference between the two can be attributed mostly to owner-builds, homes that are started and built but never show up in new-home sales).

The chart shows a nuanced picture for homebuilding. When discussing the April housing starts data last week, we pointed out that while single-family starts had risen 3.3% in April, their April level was consistent only with flat building activity. Similarly, as strong as today's new-home sales news is, it is sufficient only to support the relatively soft April level of starts. In order to suggest further gains in starts and homebuilding, we would need further gains in new-home sales on top of the explosive gains today. (And it is growth in—rather than a high level of—housing starts that supports GDP growth.)

Prior to the April sales gain, new-home sales had shown essentially zero growth for a year. We have formerly remarked that the previously flat new-home sales trends suggested some pullback in homebuilding, and that we would need strong gains in new-home sales merely to sustain homebuilding at current levels. We've seen such gains...for 1 month. Going forward, new-home sales will have to sustain the April gains and jump further if homebuilding is to continue to provide some boost to overall economic growth in the second half of this year.

So, there is no question that today's news was favorable. Our point is that it will take a lot more of such good news to support a story of even modest contributions from housing to GDP growth.

Sales and Starts of New, Single-Family Homes
US Economic Growth: Real and Nominal
Source: Census Bureau. As of 30 Apr 16.

Michael Bazdarich

Product 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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