Apparently people in the US still buy houses when it’s well below freezing outside, but today's new home sales numbers don't necessarily mean fair skies from here on in for the housing market.
The number of new home buyers in the US shot up 9.6 per cent in January to a five-year high - a shock, considering analysts were estimating a fall because of the appalling weather and weak housing data that’s been coming out of the country.
There were 468,000 sales in the month, according to data from the US Census Bureau - up from a revised 427,000 in December (revised from 400,000). Expectations were for a fall of 3.8 per cent to 400,000 sales in January.
But New River Investment's Conor Sen, a self-styled card-carrying member of #teamweather, has urged people to remember how complicated the housing market currently is.
Interest rates and house prices have surged, and much of the distressed inventory has been picked up by investors: “So while housing in most metro areas is generally still very affordable, it’s no longer the equivalent of buying the stock market at a price/earnings ratio of seven, like it was for a while.”
Both investors and cash buyers have pulled back, says Sen. Stock, land and labour are harder to find and refinancing is down.
It’s not clear that homeowners will be looking to sell any time soon, either because they remain underwater, they’re locked into a mortgage rate they’re unwilling to give up, or because they see rising prices and scarce inventory and feel like they’re better off waiting.
The most positive element of the housing market will most likely be from first-time buyers - coming out of the woodwork for the first time in several years, bringing deferred demand into the market.
Sen adds that, although the freezing weather obviously didn’t hold back sales, house price gains won’t be as rapid, though stock may likely rise.
I’m going to be focused on new home sales as the best indicator of how quickly the market can respond to demand and build more houses, and how much first time buyers have come back to the market.