The New Home Sales is a figure from the U.S. Department of Commerce’s Census Bureau measuring the number of newly constructed homes with a committed sale during the month, and includes both quantity and price statistics.
The statistics are reported as unadjusted monthly rates and seasonally adjusted annual rates. It is a major indicator of housing market trends and, in turn, economic momentum and consumer purchases of furniture and appliances.
Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets. Each time the construction of a new home begins, it translates to more construction jobs, and income which will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and the realtor. It brings a myriad of consumption opportunities for the buyer.
Refrigerators, washers, dryers and furniture are just a few items new home buyers might purchase. The economic “ripple effect” can be substantial when you consider how many new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, new home sales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the new home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.