January’s new home sales report missed substantially coming in at a 6.9 percent decline vs .6 percent expected. This report continues the decline from the one-year high that we saw in November of 2018. Investment in homebuilding declined by .2 percent in 2018, marking the weakest performance since 2010. New home inventory is also on the rise with 6.6 months of new home inventory. Mortgage rates have not pumped much life back into the housing market as we see housing data get weaker even as rates are decreasing. Gold is not responding much to housing data and continues its decline as the dollar gets stronger.
January’s Home Data
Sales of new U.S single-family homes fell more than expected coming in at a 6.9 percent decline vs .6 percent expected by the economist at Reuters. January’s seasonally adjusted rate of 607,000 units sold starts to show some cracks in the housing market. The Census Bureau revised December’s figures showing a 3.8 percent rise of new home sales for a total of 652,000 units. This continues the decline from the one-year high that we experienced in November of 2018. New home sales are usually volatile on a month to month basis, these declines will become more important and have a bigger market impact if we see February and March reports also taking a hit.
Investment in homebuilding was reduced by .2 percent in 2018 marking the weakest performance since 2010. The median house price fell 3.8 percent to $317,200, compared to January of last year. Inventory of new homes has also grown. At January’s pace of home sales there are 6.6 months of inventory that homebuilders have yet to sell, up form 6.3 months in December.
Affordability remains one of the greatest challenges in the housing market with higher home prices and mortgage rates slowing down home purchases in 2018.
During 2018 we saw rates for a 30-year mortgage push up to 5 percent. In 2019, borrowing cost have started to drop again thanks to the Federal Reserve switching gears. As of today, we are at a one-year low sitting at 4.31%. As mortgage rates have a huge impact on home sales, we would expect February’s sales to show an uptick since mortgage rates have begin to fall again.
Gold has been on the decline this month, from a high of ~$1350 in mid-February to a low of ~$1280 at the end of last week. This past week gold has started to rally again with gold breaking out above $1300 spot during yesterday’s trading session, closing at ~$1310 spot. Today we are down about $11 or 1% on the back of a stronger dollar. Gold did not respond much to January’s housing data and is responding to a stronger dollar more than anything else.