New home sales down… or not

According to the Census Bureau, sales of new homes dropped 1.6% from January to February. (On a seasonally-adjusted, annualized basis, yada yada yada.) Been in the news.

Oh noes! Bad news, right? Actually, no. For several significant reasons.

  1. Yes, new-home sales were down from January to February (sort of — see #2), but from year to year — February 2011 to February 2012 — they were up 11.4%. Why so many releases insist on focusing on short-term changes, I dunno.
  2. The margin of error is 23.9%! So sales could be anywhere from down 25.5% to up 22.3% from Feb to Feb. You’ll need a truck to carry the appropriate sized grain of salt.
  3. As Dan Green at The Mortgage Reports points out, the same report shows that the inventory of new homes is currently the lowest in recorded history:

In February, new home supply was 5.8 months. This is a slight uptick from January, but marks the fourth consecutive month that the national new home supply was sub-6 months.

When home supply is below 6.0 months, it’s considered to be bullish for housing — good news in the long-term for today’s home buyers, but not so good if you’re trying to write a contract. Short supplies drive home prices up.

However, it’s still “good” for housing.

From my vantage point, despite the headlines, this is another sign — a small one, admittedly — that the market is coming back.

About Andrew Kantor

Andrew is VAR's editor and information manager, and -- lessee now -- a former reporter for the Roanoke Times, former technology columnist for USA Today, and a former magazine editor for a bunch of places. He hails from New York with stops in Connecticut, New Jersey, Cincinnati, Columbus, and Roanoke.
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