The U.S. housing sector has become one of the preeminent tools for assessing the general health of the housing market and American economy. With more Americans buying new homes in April, the New Home Sales report provides another signal that the real estate market might be finally heading in the right direction. According to the latest Commerce Department figures, new home sales rose 3.3% in April, for a seasonal adjusted annual rate of 343,000 units.
In addition, the median sales price for new homes increased to $235,700, which represents a 0.7 percent increase over March and 4.9 percent higher than the same period in 2011.
Although the news reflects another positive for the state of the economy, the number of sales fall more than 50% below the 700,000 units economists determine to be indicative of a healthy housing market. The April figures exceeded the consensus of 335,000 units predicted by the 72 economists polled by Bloomberg News.
Nonetheless, steady gains in key economic indicators continue to lend credence to a housing market rebound after several years of depressed housing and mortgage activities.
About the New Home Sales Indicator
The New Home Sales report focuses on the level of newly constructed privately owned one-family homes. New home sales lag behind adjustments in the mortgage rates. During strong business cycles, the sale of new homes tends to be at its strongest. As the business cycle matures, new home sales diminish because the market satisfies the built-up demand.
As a leading economic indicator relied on to measure the sales volume for new homes sold during the prior month, the marker is calculated on an annualized basis. The report also confirms developments measured by Existing Homes Sales and other forward-looking metrics, to evaluate the state of the housing market and U.S. economy.
Economists track the year-over-year median sales price of new homes to monitor inflation in the housing sector.
Influences Personal Income and Government Revenues
New homes sales have a direct effect on 122 different industries, including lumber, appliances, furniture, and cabinetry. Count mortgage brokers, real estate agents, insurance agents and construction workers among the many Americans who depend on new home sales activities for their personal income. The National Association of Home Builders (NAH) estimates that each new single-family home built produce $67,000 in tax revenues for the Federal government, and $23,000 for the coffers of local and state governments.
A fact sheet , released by the NAHB in March 2012, reports a supply gap of about 1 million units. The NAHB based the number on total new home production in 2011– 609,000 units including multifamily housing, required to replace older housing and meet population growth. Closing this gap could create three million new jobs, according to the NAHB.
Generally, the volatility of new home sales data makes it necessary to make significant adjustments to the figures. The Existing Homes Sales report, which has a sampling size four times the New Homes report, carries more weight and can move equity markets.