skip navigation

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.


January New-Home Sales Show Declines

New-home sales declined by 7.8% in January, although there was a 2.9% upward revision to the December estimate, with October and November sales totals revised upward by smaller amounts. The sales declines were concentrated in the South (-14.2%), with smaller sales declines in the Northeast (-33.3%, but off a much smaller base level). Sales increased slightly in the West and Midwest.

Those analysts proclaiming “better” economic growth lately will no doubt attribute the January sales declines to extremely cold weather. Indeed, with the January cold spell hitting the South especially hard relative to the past, there is reason to believe the sharp sales declines there are partly weather-related.

Then again, it is equally likely that the “weather” overstated home sales in October and November. That is, the spate of hurricanes hitting the South in August and September clearly depressed sales then, so the spikes in home sales and housing starts in October and November most likely reflect a “catch-up” in housing activity following a hurricane-induced decline in activity earlier.

To get an idea of activity levels net of the hurricanes and cold weather, we can take a seven-month average of sales, thus averaging together hurricane-depressed months, post-hurricane boosted months, and the January cold spell. As shown in the accompanying chart, that seven-month average comes in at 615,000 units per year, about the same level as what we saw in the first six months of 2017. In other words, beneath all the weather-related swings, new-home sales look to have stalled over the past year.

It certainly is the case that inventories of unsold new homes have continued to rise over the past year, hitting 6 months’ of sales in January. It is often asserted that home inventories are tight. Those claims ignore the fact that home sales levels are also especially low. The 5- to 6-months’ sales inventories levels of the past year compare to around 4 months’ sales over 1997–2005, before inventories soared in the final months of the housing bubble. So, we take issue with those claims that homes are in short supply.

Meanwhile, data for the month have now come in on the soft side for payroll jobs, retail sales, industrial production and home sales. Maybe it is just the weather…or maybe those claims of accelerating US growth are off the mark.

Sales and Starts of New, Single-Family Homes
Sales and Starts of New, Single-Family Homes
Source: Census Bureau. As of 31 Jan 18

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 45 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 email updates as new reports are released.

© Western Asset Management Company, LLC 2022. This publication is the property of Western Asset 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. This publication is for informational purposes only and reflects the current opinions of Western Asset. 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 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.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorized and regulated by Comissão de Valores Mobiliários and Brazilian Central Bank. 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 Business Operator and regulated by the Financial Services Agency of Japan. Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) (FRN 145930). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK as defined by the FCA. This communication may also be intended for certain EEA countries where Western Asset has been granted permission to do so. For the current list of the approved EEA countries please contact Western Asset at +44 (0)20 7422 3000.