New Home Sales Highest in Ten Years: Economy on a Roll?

New home sales rose 6.2% in October to 685,000 units. The percentage gain since August was the most in nearly 3 decades.

New home sales put in huge back-to-back percentage gains, the most in nearly three decades, and steamrolling expectations according to Mortgage News Daily.

New Home Sales by Region

For whatever reason there was a 30.2% suge in the Northeast and a 17.9% surge in the Midwest according to the Census Bureau report on New Residential Construction.

Bond Market Reaction

I like to watch the bond market reaction following economic reports.

Curiously, 10-year and 5-year yields are down 1 basis point, the rest are flat. I view this as no overall reaction.

If the expectation was a jump in inflation or a strengthening of the economy, yield at the long end should have jumped.

Rate Hikes

A reader asked "why would the Fed stop hiking?" That's easy.

1) Recession

2) Sustained stock market decline

I expect both.

For further interest rate discussion, please see What Will the Yield Curve Look Like if the Fed Hikes in Dec and March?

Mike "Mish" Shedlock

No. 1-15

With the passage of time, things change and evolve. This transformation can be seen in both society and the economy. A question we must ask is just how relevant today's comparisons are with prior economic cycles? The situation today is in many ways "historically unique" due to the rampant expansion of credit in recent decades.

http://Economic Evolution Renders Many Comparisons Obsolete.html


How long have you been expecting a recession now Mish? Since 2010?


a weak dollar + foreign investors = rise in home sales


Some thoughts on the numbers.

  1. Home sale figures should not be a surprise, home builder confidence values are up and have been trending up for over a year.
  2. The number of new builds being signed and under construction are all rising. This should mean new home closings will continue to rise for the next several months.
  3. As builders have squeezed about all they can get out of the high end buyers, expect builders to refocus on starter homes for Millennials. Yes, Millennials are starting to buy homes.

On new home sales, numbers aside, do we see a trend on that chart?