February 2021 Headline New Home Sales Significantly Slow

Written by John Lounsbury and Steven Hansen

The headlines say new home sales significantly declined month-over-month. The overall sales-to-date in 2021 is better than any other year since 2006 - but the slowing of growth is swift and likely will continue to decelerate in the coming months.

Analyst Opinion of New Home Sales

This month the backward revisions were upward. Because of weather and other factors, the rolling averages are the way to view this series. The rolling averages declined. Sales this month were just barely better than last year and inventory levels exceed 4 months of demand at the current rate of sales

Growth in 2021 to-date still exceeds every year since 2006.

This data series is suffering from methodology issues that manifest as significant backward revision. Home sales, in reality, move in spurts and jumps - so this is why we view this series using a three-month rolling average.

Econintersect analysis:

  • unadjusted sales growth decelerated 22.1 % month-over-month.
  • unadjusted year-over-year sales were +1.6 % year-over-year.
  • the three-month unadjusted trend rate of growth decelerated 7.7 % month-over-month - is up 16.4 % year-over-year.

US Census Headlines:

  • seasonally adjusted sales down 18.2 % month-over-month
  • seasonally adjusted year-over-year sales up 8.2 %
  • the market expected (from Econoday) seasonally adjusted annualized sales of 825 K to 970 K (consensus 875 K) versus the actual at 775 K

The quantity of new single-family homes for sale remains well below other recent years.

Seasonally Adjusted New Homes for Sale

The headlines of the data release:

Sales of new single-family houses in February 2021 were at a seasonally adjusted annual rate of 775,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 18.2 percent (±13.9 percent) below the revised January rate of 948,000, but is 8.2 percent (±21.7 percent)* above the February 2020 estimate of 716,000.

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