US new home sales to correct in March, but remain on a strong trend

US new home sales surged unexpectedly by 7.8% mom in February despite severe temperatures in many parts of the country. This one-month increase is regarded as excessive and some moderation is expected in March. 
Market consensus put the March level at 507k, above the January level of 500k and well above last year's average of 439k. 

Taking a longer-term look at housing data, the recent sharp increases in household formation suggest that housing may be on the verge of surprising on the upside. Net household formation increased significantly last fall, from a post-2008 average of 550k to nearly 2,000k annualized. 

Looking at demographics, trend household formation is estimated at about 1,300k  per year, and recent numbers suggest that this pentup demand may finally be materializing. A recent pickup in mortgage applications for purchases is another positive sign. As a result, new home sales are expected to remain on a positive trend this year despite the likely pullback in March.