Earlier today, the Commerce Department reported(.pdf) that January new home sales rose to the highest level since mid-2008, from an upwardly revised seasonally adjusted annual rate of 427,000 units in December to 468,000 last month.
Of course, actual new home sales were only a fraction of that amount (10-20 percent, if memory serves) as real estate sales activity is at its lowest at this time of the year, but that didn’t stop financial markets from getting rather excited about this new hope for a recently struggling housing market. As noted here many times before, you may as well ignore all the housing data from December to February – the good and the bad – as volumes are so low and seasonal adjustments are so high that no clear trends can be reliably discerned.
From a year ago, new home sales rose just 2.2 percent and last month’s gain of 9.6 percent pales in comparison to the January 2013 surge in new home sales of 15.4 percent (after which home sales fell in four of the next six months).
Primarily for the reasons cited above – low volume, big adjustments – reported new home sales are very volatile during the winter months as a quick check of prior years reveals similar wild swings. For example, from November 2010 to February 2011, sales volume registered the following month-to-month changes: +15%, -7%, -12%, +11%.
Add to this the fact that new home sales are a tiny share of the overall housing market and today’s report should have been greeted with a big yawn, but, people are clearly looking for good news these days and getting excited when they get it, regardless of the context.