February new home sales seen rising 3%

The housing recovery has been a key building block of the economic comeback. And more good news on the housing front is expected Wednesday when new home sales for February are reported.

Wall Street is looking for 510,000 new home sales, up a little more than 3% from the disappointing 494,000 new houses sold in January, according to industry estimates cited by Bespoke Investment Group.

“January was weak despite the warm weather, so some snapback is likely in February, which also saw generally warmer and less wintery weather,” says John Canally, chief economic strategist for LPL Financial .

New home construction, Canally says, will add to economic growth this year, just as it has every year since 2010. Still, given that housing accounts for roughly 5% of GDP, even a strong housing market likely won’t be enough to “offset weakness elsewhere,” such as weaker exports and less capital expenditure spending from U.S. businesses, he adds.

Still, housing continues to enjoy many tailwinds, Canally says.

“Taking a longer-term look at things like housing affordability, demographics, the labor market, household formation, mortgage rates, rising rents (which affect the rent vs. buy decision), banks willingness to lend, household balance sheets and housing prices — almost all of these favor ongoing improvement in housing,” Canally says.

Housing headwinds include higher prices due to low inventory, which also increases down payment amounts, Canally adds.