Before we get into today’s new home sales report, I would like to remind everyone that the monthly supply of inventory for new homes has been higher every month in this cycle,compared to the last one. The monthly supply rose to 5.7 months according to today’s report.
Today, the Census Bureau reported that new home sales missed expectations of 669,000 units with a 631,000 print. The previous months numbers were revised downward but the trend for 2018 is still beating my expectations for the year. New home sales are growing at 6.9% so far this year. In the coming months, we will see if the rate of growth slows due to the higher mortgage rates. Revisions have been negative in the recent reports which is key, so the total growth number does face possible downside risk. The trend of 650,000 new home sales for 2018 is still very low in a historical context, especially when one considers the duration of this economic expansion and the low-interest rates. However, the current trend is beating my estimates of 2%-5% growth for the year. The good news from this report is that the median sales price is cooling off. This is a positive indicator for future growth. Since the end of 2014, I have been saying that in order for us to see continued growth in new homes sales the increase in the median home price would need to slow. The slower rate of growth in prices is due to more smaller homes being sold.
” I expect to see 2%-5% growth in new home sales that could go higher if the median sales price remains stable and the trend of building smaller homes continues. ”
New Home Sales:
Sales of new single-family houses in June 2018 were at a seasonally adjusted annual rate of 631,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 5.3 percent (±17.1 percent)* below the revised May rate of 666,000, but is 2.4
percent (±24.0 percent)* above the June 2017 estimate of 616,000.
The median sales price of new houses sold in June 2018 was $302,100. The average sales price was $363,300.
For Sale Inventory and Months’ Supply
The seasonally-adjusted estimate of new houses for sale at the end of June was 301,000. This represents a
supply of 5.7 months at the current sales rate.
New home sales are still low. Claims of “record breaking demand” were greatly exaggerated and this is why the builders aren’t building more homes. The print for existing home yesterday was negative year over year, with rising inventory, as I predicted it would be the case for 2018.
“For 2018, I anticipate existing home sales to be in the range of 5.27 – 5.53 million units. If we end the year showing negative growth, with rising inventory once again, don’t worry, be happy. This would be “normal” especially when purchase applications are still trying to party like it is 1999.”
New home sales are continuing their slow and steady climb. Since sales are still historically low, this sector has legs. This is a positive for the U.S. economy since we don’t have an over-investment thesis in housing. All is all, 2018 is looking exactly like I thought it would look. Even if sales growth fall a bit lower in the upcoming reports, we should still be able to hit my 2%-5% growth predictions.
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