New Home Sales Decline 1% in January

Written by: Mallory Hall

A recent release regarding new home sales may provide information that is not altogether promising. January’s rate of new home sales was 321,000 annually.  This statistic is lower than December’s rate by 0.9%.  However, this piece of information should not be taken in isolation.  Rather, consumers should use this data in conjunction with other economic factors such as unemployment jobless claims. However, this particular new home sales report tabulates the quantity of homes that have been newly constructed and already have an agreement to buy the home.  The report is compiled by U.S. Census Bureau, the U.S. Commerce Department and the U.S. Department of Housing and Urban Development.

December and January both resulted in dips in the new home sales rate.  This decline resulted after three steady months of an increased rate in new home sales.  However, the decline in new home sales can be attributed to other factors than consumer confidence.  Many homes were previously foreclosed, so investors may not have as much of an incentive to construct new homes when other homes are on the market.  The supply of homes is at the healthiest rate that it has been at for six years. The new homes sales report has indicated a decline in new home sales, but it is only one of many pieces of statistical data that can affect economists’ perspective of the health of the economy.

An increase in new home sales is, generally, a positive indication for the economy.  When more people are committed to buy a house, economists view this situation as an indication of consumer confidence. Individuals will not commit to buy new homes if they are worried about their potential income level or if they fear a lay-off or termination at their current place of employment.  An increase in new home sales is also beneficial for the economy because new homeowners often increase the amount they spend by purchasing new furniture, appliances, accessories and other household items.  It is also good for the economy because more construction projects translates into an increase in jobs in the construction and contracting industries, as well as flooring, carpeting, plumbing and electrical installment sectors. Adversely, a decline in the new home sales rate may indicate that construction workers may be laid off or may indicate that consumers do not feel confident in retaining their current income. According to the most recent press release, it may be assumed that new home sales can directly impact the value of stocks and bonds. This important economic indicator has a strong influence on the economy.


New Home Sales Decline 1% in January

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