Today, the Census Bureau reported that new home sales blew past estimates coming in at 733,000 units. First and foremost this is a solid headline report even with the negative revisions! The four-month trend is really important when tracking new home sales and the data has been much better for the last three months with new home sales rising as inventory fell. Both new home sales and housing starts data tend to have wide spreads month to month, but now we have confirmation that the two soft reports that came out four and five months ago had nothing to do with low inventory because inventory was actually higher in those reports.
From Census:
https://www.census.gov/construction/nrs/pdf/newressales.pdf
New Home Sales:
Sales of new single-family houses in November 2017 were at a seasonally adjusted annual rate of 733,000,
according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and
Urban Development. This is 17.5 percent (±10.4 percent) above the revised October rate of 624,000 and is
26.6 percent (±16.6 percent) above the November 2016 estimate of 579,000.
Sales Price:
The median sales price of new houses sold in November 2017 was $318,700. The average sales price was
$377,100.
For Sale Inventory and Months’ Supply:
The seasonally-adjusted estimate of new houses for sale at the end of November was 283,000. This represents a supply of 4.6 months at the current sales rate
I must stress a few key points:
Some say that new homes have a sales advantage over existing homes because existing home inventory is low. But this is not a valid theory. The ratio of existing home sales to new home sales haven’t reached their historical norms. Also, new home sales unit demand is still very low today on a historical basis. I don’t see anything in data that warrants such a thesis. A better thesis is that new home sales is continuing its slow and steady push upward a long with rising single family housing starts.
From Calculated Risk:
https://loganmohtashami.com/2017/12/19/the-slow-steady-housing-start-story-continues/
Also, we see a lot of wild month to month swings in the new home sales and housing starts data, and these highs and lows, which are often revised the following month, get over played both negative and positive.
Case in point, July and August sales were softer than the trend which lead pundits to blame low inventory, even though inventory during those months rose. When considering data for new home sales one needs to look at the 4-6 month trend, due to the possible wild swings. The revisions in this report were negative but they offset the weaker July and August numbers.
According to the four-month moving trend without today’s report, sales were “595,000″ with revisions for July, August, September and October. With today’s report the 5 month trend is running at “623,000″ This is a tad smaller that what I was looking for with the revisions but it still shows that the July and August sales weren’t a new trend of lower new home sales this year.
Most likely we will see revisions lower on this huge report as well next month, so the total new home sales number for 2017 will finish somewhere between 597,000 -621,000 I believe.
Yes we still might end the year below 600,000 total new home sales which goes into my third point.
From Calculated Risk:
http://www.calculatedriskblog.com/2017/12/a-few-comments-on-november-new-home.html
New home sale are still really, really low. Once adjusted to population, these numbers are even weaker. In fact, this has been the weakest unit sales growth in any cycle ever. However, this data also shows that new home sales and housing starts have legs to go higher. We are going into a better demographic patch so at worst we will more have replacement buyers and move up buyers which should give sales a push.
From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2017/12/22/november-new-home-sales-skyrockets-17-5-surprises-forecasts
The low inventory thesis is used as the main reason as to why sales are being held back in this cycle, but during this time monthly supply of inventory was higher every second, minute, hour, day, month and year than during any period between 1996-2005 when demand was higher.
From Fred:
https://fred.stlouisfed.org/series/MSACSR
In a few years, when demographics change, affordability will become the main stumbling block for existing and new home sales, rather than poor demographics.
More on existing home sales here
On a final note, Merry Christmas everyone! Have a Wonderful Happy Holiday with your loved ones, even you American bears who have been wrong about this country since 1790.
Romulus ( my cat) also wants to add that world growth is at decade highs because of the oil rebound and globalism. This explains why a few world markets are doing better than the U.S. and that EPS for the S&P 500 tracks strong dollar oil crash and rebound the last 3 years.
Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing market. 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