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At 10:00 A.M. (EDT), we received another report on the rapidly improving housing market when the U.S. Department of Commerce issued new residential data for the month of February. At first blush, the report was decent. Although new home sales were down more than expected on a sequential basis, they were still running considerably above the prior-year figure.

Specifically, sales of new single-family houses in February came in at a seasonally adjusted annual rate of 411,000. That figure, though down 4.6% from the revised January tally, was up 12.3% year over year. The consensus expectation called for sales of roughly 415,000 new units.

A geographic breakdown of the new home sales data made for a mixed reading. New home sales were up 18.4% and 54.9%, year to year, in the Midwest and West, but were 10.3% and 5.6% lower in the Northeast and the South, respectively. However, the respective sequential decreases of 9.7% and 2.1% in the South and West regions are a bit disconcerting, as those two areas are the biggest housing markets in the country, especially in terms of new residential construction.

The latest data—another positive snapshot of this recovering sector—come on the heels of last week’s positive reports on existing home sales and new residential construction. Both housing starts and building permits, two strong indicators of future home sales, were up markedly on a year-to-year basis. Also encouraging is the recent jump in home selling prices. Earlier today, the Standard & Poor's/Case-Shiller home-price index showed that prices increased by 8.1% for the 20-City Composite in January, the highest growth rate since June, 2006. Moreover, the new homes report noted that the median price of a new home increased 2.9% last month, to $246,800, and the supply of newly built homes on the market stands at 4.4 months at the current sales pace, which is still below the historical norm of roughly six months. All of these factors augur well for a continued recovery in this all-important sector of the U.S. economy. 

However, we would be remiss if we did not warn investors that today’s report on consumer confidence, which tumbled in March, remains a concern for the homebuilders. A less confident individual is not as likely to be in the marketplace for a new home, which for most is the biggest transaction of their lifetime.

Still, all in all, the latest data on new homes sales are yet another sign of a broadening housing market recovery. The construction and sales of new homes—though only a small fraction of the nation’s total home sales—is vital to the overall health of the U.S. economy as each new property built usually creates an average of three jobs for a year and generates close to $100,000 in tax revenues.