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.
- 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.
- 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.
- 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.