New Home Sales

What Are New-Home Sales?

Consistently, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly distribute a report measuring the sales of new single-family houses in the United States by region: Northeast, Midwest, South, and West. The new-home sales report (otherwise called new residential sales report) contains data listing several factors:

• The number of new houses sold
• The number of houses on the market
• Median and average new-home sales prices
• A chart portraying yearly sales trends, and
• Whether these sales met, surpassed, or missed the mark regarding financial analysts' expectations

Is New-Home Sales a Leading Indicator?

The new-home sales report gives an important snapshot of housing demand, and even however it gives results from events that occurred in the past, numerous analysts believe it to be one of the economy's leading indicators. All things considered, buying a house is a major investment for an individual. Financial experts view stronger-than-anticipated new-home sales data as an indication that the economy is solid since it means that there are more individuals out there able to buy homes.
Other economic factors that impact new-home sales include:

• Interest rates: When rates increase, so does the cost of borrowing, which could deter individuals from taking on mortgages.
• Unemployment rates: This influences the housing market since high unemployment means lower future earnings, which could diminish demand for housing.
• Household income: Another factor that adds to housing demand is household income since when incomes rise, demand does as well.

Why Are New-Home Sales Important?

The housing market accounts for almost 15 percent of the nation's GDP, which is a critical cut of the overall economy. Every month, individual and institutional investors enthusiastically expect the new-home sales report as well as the release of even more specific homebuilding data, for example, housing starts and building permits, which furnish investors with an even more itemized view on what's filling U.S. growth.
Numerous investors decipher the data gave in these reports — particularly when there are stronger or more fragile than-anticipated numbers — as a motivation to buy or sell.

New-Homes versus Existing Homes

A new-home sale is recorded by the Census endless supply of the sales contract and acceptance of the deposit. "The house can be in any stage of construction: not yet begun, under construction, or currently completed," it states.
The existing-home sales report, then again, is released by the National Association of Realtors, not the Census Bureau. It are not new to Exist homes. This category incorporates single-family homes, townhouses, and centers.
An existing home is thought of "sold" upon the completion of the closing system, which ordinarily requires somewhere in the range of 30 and 60 days. Hence, even however the new-home sales and existing-home sales reports are released around similar time every month, they really measure different time spans. Consequently, in 2000, the National Association of Realtors made another sales measurement called forthcoming home sales, which contains data on homes that have been sold yet not completely closed. The forthcoming home sales report has a duration like new-home sales. This data can be found on the National Association of Realtors website.

When Is New-Home Sales Data Released?

The new-home sales report is released at 10:00 AM on the seventeenth business day of every month and measures the previous month period.

Does the Stock Market Affect New-Home Sales?

Stock market specialists have compared month to month gains in the stock market with housing data, and keeping in mind that the long-term trend for the two has been positive, there is no direct connection between real estate prices and stock market gains. In this way, investors can't reason that the stock market will connect with the housing market, and thusly, housing prices don't be guaranteed to go down when the stock market goes down (or vice versa).
Of course, there are generally different sides to each coin, and some could contend that home buying is evidence of a phenomenon known as the "Wealth Effect," and that means that individuals will generally spend more when they accept that the value of the things they own is rising, so in the event that their financial assets are expanding, they might feel more comfortable making a large investment, such as buying a house.

How Do New-Home Sales Affect the Economy?

As per data from the Federal Reserve, as of October 2020, real estate represented 25 percent of household net worth in the United States, and that means that a large cut of American wealth is directly tied to the housing market. Plus, a strong economy is reflected by increased demand for the goods and services that supplement the housing market, like home goods, furniture, machines and cars.

Instructions to Interpret New-Home Sales

Financial experts, by and large, view new-home sales that surpass expectations as an indication that the economy is. At the point when new-home sales data comes in lower than expectations, that is taken as quite possibly the earliest indicator of an economic slowdown.

Highlights

• New Home Sales, otherwise called "new residential sales," is an economic indicator that measures sales of recently assembled homes.
• New Home Sales data depends on a representative sample of home sales and is driven by factors like household income, unemployment, and interest rates.
• New Home Sales is seen as a lagging indicator of demand, however is still closely watched by investors for hints about the more extensive developments in the economy.