New US home sales surged in January and supply shrank, according to volatile data released on Friday.

The 670,000 annual rate reported by the Commerce Department outstripped the highest estimate from five-dozen economists. The range was 340,000 to 664,000.

It marked the briskest pace since March, and ostensibly suggested a combination of builder incentives and lower rates helped lure buyers back to what remains a very forbidding market. That said, the gain was entirely attributable to the South. Every other region notched a decline.

Revisions subtracted 19,000 from the prior three months.

The data came on the heels of figures showing a 12th consecutive monthly decline in existing home sales, and amid a sharp improvement in builder sentiment. Suffice to say the housing market is a microcosm of a highly conflicted US macro environment.

Notably, prices notched a YoY decline. The median price in January was $427,500, down dramatically from last year’s peak near half a million.

That pretty plainly suggests that in addition to buy-downs and other perks, builders are resorting to price cuts.

The average price plummeted almost $70,000 from the prior month. It was the largest monthly decline in history, both in nominal terms (which is mostly meaningless) and in percentage terms.

Still, at $474,400, it’d be a stretch to suggest new cookie cutter boxes are a bargain.

As a reminder, existing home price growth looks poised to turn negative on a YoY basis for the first time in 132 months, and the correction in the total value of US residential real estate from last summer’s peak through year-end was the largest June-to-December drop since 2008+. The MBA’s measure of purchase applications sits at a 28-year low.

As ever, it’s hard to say whether signs of robust housing activity are good news or bad news. Indeed, given how volatile this particular data set is, along with the fact that the January increase was attributable to just one region (albeit the largest region), it’s difficult to say much at all.

Residential fixed investment has been a drag on GDP for seven straight quarters, a streak which, if past is precedent, should presage a recession.

And yet, if the “animal spirits” are well and truly alive in housing, it could embed a latent re-acceleration in shelter CPI components, which are currently on track to recede sharply on a lag.

Friday’s data showed months’ supply of new homes in the US fell to 7.9 in January from 8.7 in December. Supply hit a record low of 3.3 months in August of 2020 and reached 10.1 in September of last year as mortgage rates were in the process of peaking above 7%.