New Home Sales Tumble, While Labor and Manufacturing Signal Resilience — Evening Brief – 03.19.26

The U.S. economy is sending mixed signals as weakness in housing contrasts with continued resilience in labor markets and manufacturing. 

New home sales plunged 17.6% month-over-month to 587,000 in January, well below the 728,000 consensus and marking the lowest level since October 2022. December’s figure was also revised lower, reinforcing the extent of the slowdown. On a year-over-year basis, sales declined 11.3%, reflecting the ongoing pressure from elevated mortgage rates and affordability constraints. 

Inventory continues to build, with 476,000 homes for sale, translating to 9.7 months of supply—a notable increase from both the prior month and a year ago. Pricing has also softened, with the median home price falling 6.8% year-over-year to $400,500, while the average price declined to $499,500, signaling cooling demand. 

Despite housing weakness, the labor market remains stable. Initial jobless claims fell to 205,000, below expectations, while the four-week average edged lower, indicating limited layoffs. Continuing claims rose modestly to 1.857 million, suggesting some softening in reemployment trends, but the unemployment rate held steady at 1.2%. 

On the activity side, the Philly Fed Manufacturing Index climbed to 18.1 in March from 16.3 in February, handily beating expectations of 5.5. The current general activity diffusion index rose for a third straight month, even as some components softened: the business conditions index slipped to 40.0 from 42.8, new orders eased to 8.6 from 11.7, and employment ticked up to 0.8 from -1.3. Capital expenditures were a standout, jumping to 25.8 from 14.4, while prices paid increased to 44.7 from 38.9, signaling persistent cost pressures.