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New Home Sales Start Year Strong; Consumer Confidence Rebounds

Sorohan, Mike
New single-family houses hit the year running in January, the Census Bureau and HUD reported yesterday.

The report said new home sales rose by 15.6 percent in January to a seasonally adjusted annual rate of 437,000. The rate was 28.9 percent higher from a year ago.

Regionally, new home sales improved in every area, led by a 45.5 percent increase in the West from December; sales there improved by 60.3 percent from a year ago. in the Northeast, sales rose by 27.6 percent from December and by 54.2 percent from a year ago.

In the Midwest, new home sales rose by 11.1 percent from December and improved by 13.6 percent from a year ago; in the South, sales rose by 3.2 percent and increased by 16.6 percent from a year ago.

The median sales price of new houses sold in January rose to $226,400; the average sales price improved to $286,300. The seasonally adjusted estimate of new houses for sale at the end of January rose to 150,000, representing a 4.1 month supply at the current sales rate--the lowest rate since 2005.

“January’s surge in new home sales should allay fears that the housing recovery is losing momentum,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “Builders remain relatively upbeat about future sales but concerned about buyer traffic. Regional builders and custom home builders may also be expressing some frustration with rising land costs, material prices and tight labor supplies.

Also yesterday, Standard & Poor’s, New York, said its S&P/Case-Shiller Home Prices Indices finished 2012 strongly, with all three headline composites posting gaines.

The national composite posted an increase of 7.3 percent for 2012; the 10- and 20-City Composites reported annual returns of 5.9 percent and 6.8 percent, respectively. Month-over-month, both the 10- and 20-City Composites moved into positive territory with gains of 0.2 percent, more than reversing November’s losses.

The report said 19 of the 20 Metropolitan Statistical Areas measured posted positive year-over-year growth, with only New York declining.

“Home prices ended 2012 with solid gains,” said David Blitzer, chairman of the Index Committee with S&P Dow Jones Indices. “Housing and residential construction led the economy in the 2012 fourth quarter.”

Also yesterday, The Conference Board, New York, said its Consumer Confidence Index, which had declined in January, rebounded in February. The Index now stands at 69.6, up from 58.4 in January. The Present Situation Index increased to 63.3 from 56.2. The Expectations Index improved to 73.8 from 59.9 last month.    
Lynn Franco, director of Economic Indicators with The Conference Board, said confidence rebounded in February as the shock effect caused by the fiscal cliff uncertainty and payroll tax cuts appears to have abated.

“Consumers’ assessment of current business and labor market conditions is more positive than last month,” Franco said. “Looking ahead, consumers are cautiously optimistic about the outlook for business and labor market conditions. Income expectations, which had turned rather negative last month, have improved modestly.” 
Consumers’ assessment of present day conditions improved in February. Those claiming business conditions are “good” rose to 18.1 percent from 16.1 percent, while those stating business conditions are “bad” decreased to 27.8 percent from 28.4 percent. Consumers’ appraisal of the labor market was mixed. Those saying jobs are “plentiful” increased to 10.5 percent from 8.5 percent, while those claiming jobs are “hard to get” edged up to 37.0 percent from 36.6 percent.
Consumers were more optimistic about the short-term outlook this month. Those expecting business conditions to improve over the next six months increased to 18.9 percent from 15.6 percent, while those expecting business conditions to worsen declined to 16.5 percent from 20.4 percent.
The report also said consumers’ outlook for the labor market was more positive. Those anticipating more jobs in the months ahead improved to 16.7 percent from 14.4 percent, while those expecting fewer jobs decreased to 21.5 percent from 26.7 percent. The proportion of consumers expecting their incomes to increase rose to 15.7 percent from 13.5 percent, while those anticipating a decrease fell to 19.6 percent from 23.3 percent. 

“February’s improvement was likely exaggerated by a couple of extraneous factors,” Vitner said. “The survey period likely captured some of the relief that the fiscal cliff was resolved without too much trouble but was completed too soon to include much of the recent anxiety over the looming sequestration. February is also an odd month for consumer confidence, which hit its all-time low in February 2009. The seasonal adjustment process tends to exaggerate increases during this month. Past years have seen consumer confidence give back some of its February gains in subsequent months.”

Vitner added that while confidence is improving, “we still have a long way to go before consumer confidence fully recovers…consumers are unlikely to go on many shopping sprees when they are worried their take-home pay is declining.”