Back on April 23rd of this year I wrote this article headline: “Time For New Home Sales To Show Growth”
Today’s new home sales print changes that prediction to history.
Sales of new single-fam houses in July 2016 were 654k (SAAR) up 12.4% (+/- 12.7%)* from June http://go.usa.gov/3tUud
“Sales of new single-family houses in July 2016 were at a seasonally adjusted annual rate of 654,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 12.4 percent (±12.7%)* above the revised June rate of 582,000 and is 31.3 percent (±19.9%) above the July 2015 estimate of 498,000. The median sales price of new houses sold in July 2016 was $294,600; the average sales price was $355,800. The seasonally adjusted estimate of new houses for sale at the end of July was 233,000. This represents a supply of 4.3 months at the current sales rate.”
Sales in the first two months of 2016 were negative compared to 2015, the sales comps were high to work with. However, from March to November we needed to show growth year over year to have sales growth in 2016 as the year over year comps were very manageable to beat.
So far, we have seen that growth and the revisions have not significantly changed those numbers .Sticky revisions (corrections that don’t substantially change the print numbers) are key with new home sales because, historically corrections can be substantial. The median sales price leveling off and this is the most bullish data line for housing.
In order to really see improvement in the housing market for this sector we would need to see growth past the 50 year moving average. It remains the case that if we expect new home sales to show growth above 675K-775K total units, builders will need to offer smaller more affordable homes.
Wall Street Journal has an excellent chart on this
Reminder: We’re selling far fewer homes than in past housing cycles except at the high end http://on.wsj.com/2c2MIT0
This flatting out in new home sale median prices is bullish. This chart below is the most bullish case for housing sales. We need to see more growth in the $200,000 to $399,999 price home level and any growth from the less than 200,000 homes will be a positive.
This all falls back to an article I recently wrote about the builders love for building bigger and bigger homes since 1975. More here
Why Building More Homes Won’t Help Housing Affordability
From Doug Short
Today’s report is also a shot against those who profess that low inventory and tight lending are holding the market back. If there is an inventory crisis why are new and existing home sales at cycle highs?
Demographics are the most powerful force in economics and will lay to waste the myths of low inventory and tight lending. Affordability should have always been the main concern outside a soft demographic patch from 2008-2019.
In two years we will see if housing truly has legs because at that point we will not be comparing sales to historic low levels. That will be the test to see if we can get growth post 675K-775K total new home sales levels.
From Doug Short
For now, as long as the median sale price doesn’t take off like it did from 2012-2015, we could see this happen.
Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data daily on his own facebook page https://www.facebook.com/Logan.Mohtashami