The report indicates the level of new privately owned one-family houses
sold and for sale. New home sales usually have a lagged reaction to changing
mortgage rates. They also tend to be stronger early in the business cycle when
pent-up demand is strong, and they fade later in the cycle as the demand for
housing is sated. In addition to home sales, the market monitors the number of
homes for sale relative to the current sales pace. As this inventory measure
falls (rises), housing starts tend to rise (fall). Finally, the median home
price provides an indication of inflation in the housing sector, though only
year/year changes provide any meaningful information.
The home sales report is quite volatile and subject to huge revisions,
making any one month's reading very unreliable. The report rarely prompts a
market reaction. The market prefers the existing home sales report, which has a
sample data pool four times as large and is released earlier in the month.
