The Daily Difference: Market Update February 26, 2014

Monday’s prediction: New home sales will be lackluster, but at 7%, this is a fraction of the total housing market (the truly significant number is existing home sales), and weather will likely be blamed. Wednesday’s reality:  New home sales came in at a 5-year high of 468,000 units, representing an annualized increase of 9.6%. Wow. The gains were led by the Northeast, which advanced 73.7%.  So much for the weather excuse, which indicated numbers would be weaker in the Northeast and Midwest than the West and South.

Tuesday’s Case-Shiller Home Price Index indicated prices are up 0.8% month over month and 13.4% year over year, narrowly beating estimates of 0.6% and 13.3%, respectively. Despite an increase in mortgage rates, the housing recovery seems to be intact. Expect materials to jump based on the new housing number and consumer discretionary to outperform due to homeowner’s growing equity (confidence=purchases). Today’s new housing number should also offset any uncertainty caused by Tuesday’s Consumer Confidence number, which came in at 78.1 vs. a consensus of 80.1. The major disappointment was in the underlying expectations number, which contracted to 75.7 from 80.8, although expectations should get a boost from the robust housing numbers.