New-home sales hit 7-month high in February

Dive Brief:

New single-family home sales in February jumped 6.1% from January's upward-adjusted rate of 558,000 to a seasonally adjusted annual rate of 592,000, the Commerce Department reported Thursday. The rate is 12.8% above the year-ago estimate of 525,000.
February's figures came in ahead of analyst expectations, with economists polled by MarketWatch calling for an annual rate of 571,000 sales.
The median sales price of new homes sold in February was $296,200, down from the downward-revised $308,200 in January and upward-adjusted $329,900 in December. The supply of new homes decreased to 5.4 months in February from 5.6 months in January.

Dive Insight:

February's showing comes on the heels of a positive January report that had analysts hopeful for a strong start to the year's new-home sales. A boost in housing starts in February — particularly in the single-family market — dovetails with today's sales report. Construction employment, in turn, reached a 10-year high in February, adding nearly 19,000 residential construction jobs alone. The boost in employment likely means more opportunities for new construction — an expansion that would inject much-needed inventory into the market and ease price growth.

While growth in housing starts and construction employment points to recovery, the persisting inventory shortage remains a drag on the housing market. Existing-home sales also fell off in February, dropping 3.7% as available inventory in that category contracted for the 21st month in a row.

Builder confidence, however, swung up in March to its highest level since June 2005 on what economists have pegged as a strong market foundation — particularly in the single-family construction sector, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

Though a positive showing in the month's housing starts and a resurgence in optimism in the sector could mean continued growth, builders will have to find ways to counterbalance costs associated with the persisting lot and labor shortage, high mortgage rates and rising home prices that are proving a drag on recovery.