New Home Sales Plunge In January

Date: February 26, 2016

Commerce Department Finds 9.2% Dip In Home Sales For Month

According to the latest Commerce Department data, in January new home sales fell 9.2 percent to an annualized rate of 494,000. Economists had expected sales to fall to 520,000, Bloomberg News reports. The decline was largely attributed to a 32.1 percent drop in sales in the West. The January drop “brings new-home purchases more in line with the steady pace of progress” that has been ongoing since the recession’s end. Sales are being helped by factors like job growth, indications of wage growth, and lower borrowing costs. These factors, together with home sales, are seen as “helping alleviate the weakness in factory output tied to sluggish global demand,” Bloomberg says. Reuters reports economists were not overly-concerned about the decline in January, since new home sales data can be volatile. JPMorgan economist Daniel Silver said, “Through some of the noise in the data, it appears that home sales are continuing to trend higher over time off of historically low levels. We maintain our view that the housing market will continue to recover.” The AP reports in an indication of limited affordability, the median price for new homes fell 4.5 percent from the prior year to $278,800, while the mean price rose 2.7 percent in the same period to $365,700. The $90,000 difference indicates homebuilders are focused on the higher end market. The “increase in the average price has consistently stayed ahead of wage growth, hurting affordability.” The Wall Street Journal reports weather may have affected sales in the West. Barclays economist Jesse Hurwitz said, “The sharp drop in sales in the West region may have been driven by poor weather, as regional precipitation was at least 3 inches above the normal seasonal pattern in January. We expect new-home sales to trend higher as the gradual recovery in housing continues.”

What This Means For Small Businesses

The housing market has been uneven in the years following the recession, leaving small businesses that deal with this aspect of the economy particularly vulnerable. Analyst consensus appears to favor growth in the housing market, however, which should come as welcome news for small businesses, especially in the construction sector.

Additional Reading

Forbes also reports on the latest Commerce Department new home sales data.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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