Economic Indicator - New Home Sales
Another record setting economic indicator was released today -- new Home Sales in April reached a seasonally adjusted annual rate of 1.316 million. Sales surged 37.2% in the Northeast market and rose 2.8% in the West. Sales fell 5.3% in the South and dropped 0.5% in the Midwest. What does this mean?
The Census Bureau collects new home sales based upon the following definition: "A sale of the new house occurs with the signing of a sales contract or the acceptance of a deposit." The house can be in any stage of construction: not yet started, under construction, or already completed. Typically about 25% of the houses are sold at the time of completion. The remaining 75% are evenly split between those not yet started and those under construction.
This indicator provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. This narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. I described this a the ripple effect when discussing Existing-home sales yesterday.
This relates to personal finance because by tracking economic data such as new home sales we can gain specific investment ideas (construction, home improvement, machinery, etc).
Thanks for reading!
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