Low Inventory Didn’t Hurt New Home Sales

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Today, the Census Bureau reported that new home sales blew past estimates coming in at 685,000 units. Both new home sales data and housing starts data tend to have wide spreads month to month, but the negative revisions to last month’s new home sales report were small with the final number coming in 645,000. This current print is the single best print of new home sales in this cycle because it came after a strong print from last month due to a rebound in sales following the hurricanes.  As with this month’s existing home sales report, this new homes sales report shows that low inventory is not holding back sales.

Best report of the cycle, period!

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

New Home Sales:

Sales of new single-family houses in October 2017 were at a seasonally adjusted annual rate of 685,000,
according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and
Urban Development. This is 6.2 percent (±18.0 percent)* above the revised September rate of 645,000 and
is 18.7 percent (±23.5 percent)* above the October 2016 estimate of 577,000.

Sales Price:

The median sales price of new houses sold in October 2017 was $312,800. The average sales price was
$400,200.

For Sale Inventory and Months’ Supply:

The seasonally adjusted estimate of new houses for sale at the end of October was 282,000. This represents
a supply of 4.9 months at the current sales rate.

” For 2017, I predict 4%-7% growth, if the positive trend of builders offering smaller homes continue then we can have much more growth in sales in 2017 

https://loganmohtashami.com/2016/12/31/2017-housing-economic-predictions/

As of today we have reached 8.9% growth, year to date.   Even more important however, is that the median sales price hasn’t moved too much for some time now.  This is the single most bullish data line for housing because it means more lower priced homes are in the mix – a necessary variable in order for unit sales growth to occur.

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

Median Sales Price Dec

NOV NEW HOME SIZE

Even with this healthy growth, new home sales are still very  low considering the economic context.  New home sales and housing starts should continue to have only slow and steady growth until about 2019 when our demographics for housing improve.

There is no housing crisis or labor crisis in this economic cycle. Demand is soft and housing starts are going to be slow but don’t fall prey to the myths about low inventory or a construction labor crisis.  This cycle that looks as it should considering our current demographics.

From Doug Short
https://www.advisorperspectives.com/dshort/updates/2017/11/27/october-new-home-sales-up-6-2-beats-forecast

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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