New home sales measure the number of newly constructed homes with a committed sale during the month. The level of new home sales indicates housing market trends and, in turn, economic momentum and consumer purchases of furniture and appliances.
Traders track new home sales closely because it is a measure of economic momentum and confidence. People have to be feeling fairly confident in their personal finances to buy a house.
New home sales have a powerful multiplier effect through the economy, and therefore across the markets and your investments. 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. Home owners tend to buy refrigerators, washers, dryers and furniture. The positive economic ripple effect is substantial. Trends in the new home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.<< Back to Glossary Index