New home sales

New home sales in January totaled 923k, above the estimate of 856k and up from 885k in December (revised up from 842k). This figure peaked out at 979k last July but certainly is running at a good pace as the market desperately needs more new supply. Months’ supply was little changed at 4.0 vs 4.1 and the median home price was up 5.3% y/o/y (very volatile figure month to month because of the influence of mix). The average price went to a record high of $408,800 because of an increase in home sales priced above $500,000 relative to the gain in those priced below.

Bottom line, we know the housing market has been red hot and with 10% y/o/y price gains, maybe too hot. Now that mortgage rates are rising, we’ll likely see a rest. Since this January number, the average mortgage rate has risen by 20 bps to back above 3%. What is stunning is the rapidity of this move higher in long rates as the long end has essentially tightened policy by 50 bps in just 7 weeks. Along with another jump today, the 5 yr inflation breakeven is up by 4.4 bps to 2.44%, a level last seen in May 2011.

NEW HOME SALES

5 yr INFLATION BREAKEVEN