New Home Sales data is compiled monthly by the Department of Commerce's Census Bureau and is gathered from builders throughout the country. The data represents new home sales for the nation as well as four areas of the country: the Northeast, the Midwest, the South, and the West. Information on the average price of a home, the number of homes for sale, and the supply of unsold homes are also provided. The data is an important indicator because it shows any strength or weakness in the housing sector. The housing sector data is valuable because when consumer spending changes, it usually appears in this sector first. Consequently, a chain reaction typically occurs. A slowdown in new home sales tends to lead to a slowdown in housing starts, which will continue to affect other indicators possibly resulting in a recession.

New Home Sales data is often volatile and difficult to predict. Most analysts look at a three-month average in order to see any trends in the growth rate. Surges in the release are often greeted with little more than an average reaction in the bond market. However, the data remains significant in showing the condition of the housing sector of the economy.

It is no secret that the housing sector has turned sour after being one of the bright spots of the economy over the past few years. Analysts are uncertain when a general leveling-off of the precipitous declines in housing will occur. Some analysts predict housing will continue to struggle until late 2008. Many purchasers continue to experience problems obtaining financing as liquidity issues plague higher loan amounts.

Some analysts predict another Fed rate cut at the end of October. If this occurs, long-term rates will generally ease over time. However, remember that in the short-term a Fed rate cut is used to spur the economy. This often causes rates in the short-term to spike higher.