March 24, 2020
New home sales fell 4.4$ in February to 765 thousand but the decline is from an upward-revised pace of sales in January of 800 thousand which was the fastest pace of sales since May 2007. New home sales are always volatile so we prefer to look at the 3-month average pace of new home sales which is now 763 thousand. Over the past year new home sales have risen 14.3%. While interesting, this indicator is relatively useless given the events of the past few weeks. Clearly, home sales as well as every other economic indicator are going to take a big hit in the months ahead.
It is hard to make any sort of guess regarding the economy at this point. What we need is some hint that the spread of the virus is slowing and, beyond that, that the number of active cases is actually shrinking. We are not there yet. Having said that our sense is that these early indicators will be forthcoming by mid-April and more solid evidence by the end of next month. Thus, we expect new home sales to rebound in the second half of the year.