New Home Sales Look Fine

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The new home sales data for August was released today from the US Census Bureau and while the headline numbers look bad compared to some analyst’s expectations, the trend of slow and steady growth in the housing market continues.

July ‘17 new home sales were 571,000 (SAAR), down 9.4% from June ‘17 and down 8.9% from July ‘16

Both today’s new home sales report and tomorrows existing home sales report will show that despite exaggerated claims that  there is  record breaking demand for home sales, demand is slow but steady.  The data also show the flaw in the notion that home builders have an advantage because existing inventory levels are low.  More on that here:

https://loganmohtashami.com/2017/08/16/home-builders-have-no-advantage-over-existing-inventory/

Since unit sales for new homes in this cycle are being compared to the lowest levels ever in U.S. history, sales had the best legs for growth, ever in our life time. Additionally, our working population is much larger and rates are much lower in this cycle. Considering those factors, demand in this cycle has been very slow but steady for new home sales, but not record breaking demand.

Census report:  https://www.census.gov/construction/nrs/pdf/newressales.pdf

New Home Sales:

Sales of new single-family houses in July 2017 were at a seasonally adjusted annual rate of 571,000,
according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and
Urban Development. This is 9.4 percent (±12.9 percent)* below the revised June rate of 630,000 and is 8.9
percent (±15.4 percent)* below the July 2016 estimate of 627,000.

Sales Price:

The median sales price of new houses sold in July 2017 was $313,700. The average sales price was
$371,200.

For Sale Inventory and Months’ Supply:

The seasonally-adjusted estimate of new houses for sale at the end of July was 276,000. This represents a supply of 5.8 months at the current sales rate.

Remember too, that monthly inventory has been higher in this cycle in every month, compared to the last cycle.

From Fred: 
https://fred.stlouisfed.org/series/MSACSR

AUGUST MOnlthy Supply new homes

New home sales are still very low but should improve as our demographics improve. Still, that is bitter medicine for those who had hoped for a better than  571K print for  July 2017.

From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2017/08/23/july-new-home-sales-down-9-4-from-june

August new home sales

As long as median sales prices for new homes don’t take off we can expect more growth in unit sales.   Because new homes are much more expensive than existing inventory we need more smaller price homes in the mix in order for growth in this sector to happen.

For 2017, I predicted growth of 4%-7%  in new home sales which could go higher if the median sales price didn’t run away from us.

From Fred:   https://fred.stlouisfed.org/series/MSPNHSUS
August median sales prince

Don’t put too much weight on the lower numbers of this report. Revisions were good and as  long as we continue to see slow and steady growth in the housing market there is no need for concern. If you believe the myth of record breaking demand due to a nonexistent inventory crisis however, you are setting yourself up for disappointment!

Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing marketLogan 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