New Home Sales "Better, Not Strong", and Regionally Very Uneven: US +6.7%, Midwest +47.4%, Northeast -26.7%

The Census Bureau Residential Home Sales report shows Sales of new single-family houses in April 2014 were at a seasonally adjusted annual rate of 433,000.

Sales are 6.4 percent (±15.9%) above the revised March rate of 407,000, but is 4.2 percent (±14.2%) below the April 2013 estimate of 452,000.

Supply is 5.3 months at the current rate of sales.

"Better, Not Strong"

Bloomberg reports Purchases of New U.S. Homes Increase by Most in Six Months but the details (shown below) are interesting.

Purchases of new U.S. homes rose in April by the most in six months as buyers began to respond to falling mortgage rates.

“The deep freeze is over and I think we can expect new home sales to continue to rise,” said David Berson, chief economist at Nationwide Insurance in Columbus, Ohio, who projected a 432,000 rate of April sales. “It’s better; it’s still not strong.”

New-home sales, which account for about 7 percent of the residential market, are tabulated when contracts are signed, making them a timelier barometer than transactions on existing homes.

New Home Sales by Region (in thousands)

Year	Month	United States	Northeast	Midwest	South	West	Month's Supply
2013(r)	January	453	31	58	222	142	3.9
	February	448	38	67	209	134	4.1
	March	440	33	61	237	109	4.2
	April	452	32	62	260	98	4.3
	May	431	25	70	238	98	4.5
	June	459	33	56	253	117	4.2
	July	367	32	53	190	92	5.6
	August	379	32	58	206	83	5.5
	September	399	25	60	220	94	5.5
	October	450	32	68	264	86	4.9
	November	445	33	57	243	112	5.0
	December	442	25	60	251	106	5.1
2014	January (r)	457	30	51	256	120	5.0
	February (r)	437	24	57	261	95	5.1
	March (r)	407	30	57	228	92	5.6
	April (p)	433	22	84	235	92	5.3

Take a good look at that last line. The surge in new homes is entirely in the Midwest. Didn't the Northeast have bad weather? Perhaps the bad weather lingered on in the Northeast. Alternatively, perhaps the Midwest was the most undervalued area.

Regardless of reason, this huge distortion should not inspire much national confidence.

Percent Changes and 90% Confidence Levels

Percentage Change	United States	Northeast	Midwest	South	West	Month's Supply
April 2014 from March 2014	6.4%	-26.7%	47.4%	3.1%	0.0%	-5.4%
90% Confidence Interval	± 15.9	± 37.2	± 64.1	± 19.5	± 24.1	± 15.8
April 2014 from April 2013	-4.2%	-31.3%	35.5%	-9.6%	-6.1%	23.3%
90% Confidence Interval4	± 14.2	± 31.2	± 42.4	± 19.5	± 18.2	± 22.3

Year-over-year, the US is down, the South is down, the Northeast is down, and the West is down. Only the Midwest is up.

And please note the exceptionally wide confidence levels for Midwest sales. 

The Census bureau adds these additional notes "Changes in seasonally adjusted statistics often show irregular movement. It takes 3 months to establish a trend for new houses sold. Preliminary new home sales figures are subject to revision due to the survey methodology and definitions used. The survey is primarily based on a sample of houses selected from building permits. Since a “sale” is defined as a deposit taken or sales agreement signed, this can occur prior to a permit being issued. An estimate of these prior sales is included in the sales figure. On average, the preliminary seasonally adjusted estimate of total sales is revised about 4 percent. Changes in sales price data reflect changes in the distribution of houses by region, size, etc., as well as changes in the prices of houses with identical characteristics. Explanations of confidence intervals and sampling variability can be found on our web site listed above."

Because of the wide deviation from norm, the census bureau does not have much confidence in the Midwest number. Again, for whatever reason, the Midwest was unusual to say the least. But don't expect most of mainstream media to offer these kind of cautions, and certainly don't expect them to do anything but cheer the increase in sales while also assuming a one-month change in one region translates into a trend change for the country.

As with existing home sales, there is little or nothing that suggests a trend change is at hand. Please see Existing Home Sales "Rebound": Headline Hype vs. Reality for additional details.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com