Existing home sales came in low last Friday, with a combination of bad weather, high prices, unappealing mortgage rates and tight supply contributing to the fifth decline in six months. Expectations were not high, therefore, for the sales figures for newly constructed homes in January.
New homes sales had been unexpectedly low in December, but the US Commerce Department today announced that a massive swing occurred last month, with sales leaping 9.6% to an annualised rate of 468,000, the highest level seen in over five years and coming in well above even the biggest estimate of analysts polled by Reuters. Furthermore, December’s rate was revised up to 427,000 from the originally-reported 414,000.
This case of good housing news, uncommon of late, gave a lift to Wall Street and by early afternoon in New York, the Dow Jones had gained 0.26% to 16,221. The S&P 500, in the hunt for a record close, rose 0.31% or 5.8 points to 1850.9.
Eric Rosengren, the head of the Boston Fed, has been speaking about the economic outlook today and said that recent falls in the US unemployment rate overstates the progress made in the labour market and the Fed should not hurry to end its monetary stimulus.
He pointed out that there is a difficulty for economists in evaluating whether recent soft payroll growth is on account of a slowing economy or just the transitory effects of bad weather. ‘In my view, this uncertainty provides an additional strong rationale for taking a patient approach to removing the monetary policy accommodation that the Federal Reserve has been deploying,’ he said.