New Home Sales Is The Only Housing Metric That Has Anyone Worried These Days

The U.S. housing market has been one of the bright spots of the global economy.

But the data hasn't not been uniformly bullish.

Economists have noted that new home sales has been a laggard. And with housing starts roaring back, some are concerned that the market for new homes may soon see a supply glut.

Here's TD Securities Millan Mulraine:

New home sales to improve
The new homes market has been a laggard in the overall housing market recovery, and while new homebuilding and existing home sales activity have risen significantly from their lows, new home sales have yet to enjoy a similar turnaround in fortune. In December, we expect sales activity to improve modestly, with the pace of sales boasting a respectable 6.1% m/m gain to 400K. The increase in sales will add to the positive momentum in November, when sales rose an equally impressive 4.4% m/m, justifying the surge in optimism among homebuilders (as seen in the NAHB homebuilders’ sentiment report) about sales prospects in recent months. In the coming months, we expect the positive momentum in new home sales activity to be sustained, though it is likely to continue to lag the buoyancy in the existing homes market.

Here's a chart. The concern is that lagging new home sales could cause another supply glut.

From HFE's Jim O'Sullivan:

While manufacturing has been weak, housing indicators have generally been strengthening. Indeed, housing is now the strongest part of the economy—in growth terms, not levels. At 377K, the November reading for new home sales was just a fraction of the 1.389 million level reached in 2005, but it was up 15% from 12 months earlier. We expect the uptrend to continue in today’s report for December.

The December new home sales report gets published at 10:00 AM ET. Economists are looking for a reading of 388k, up from 377k last month.