In 2017 I wrote:
” 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. ”
All housing data this year looks exactly in line with my expectations and it shouldn’t be looked at with a bearish tone. In fact we are on pace to still beat by 2%-5% growth forecast for new home sales.
Also, the median sales price is falling and this is a bullish sign not a bearish one as well because this means that smaller homes are part of the sales mix. This is consistent with the growth of town-home construction we have seen lately.
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 cycle. The monthly supply rose to 5.9 months according to today’s report.
Also in today’s Census Bureau report new home sales missed expectations with a 627,000 print. 2 out of the last 3 months had negative revisions, so the negative revision trend is still intact. With that said, new home sales are still growing at 7.2% year to date and 12.8% year over year from last July. The coming months will determine if the rate of growth will slow even more, consistent with the lack of growth in housing starts. Revisions have been negative in the recent reports, so the total growth for the year is at risk of ending lower. The current trend for new home sales for 2018 is running at 646,000, which is still very low in a historical context. This is especially true when one considers the duration of this economic expansion and the low mortgage rates. However, the current trend is still beating my estimates of 2%-5% growth for the year. The good news from this report is that the median sales price is continuing to cool. This is a positive indicator for future growth. In order for us to see continued growth in new homes sales, the median sales price needs to cool off which it has.
New Home Sales:
Sales of new single-family houses in July 2018 were at a seasonally adjusted annual rate of 627,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 1.7 percent (±14.7 percent)* below the revised June rate of 638,000, but is 12.8 percent (±15.7 percent)* above the July 2017 estimate of 556,000.
The median sales price of new houses sold in July 2018 was $328,700. The average sales price was $394,300.
For Sale Inventory and Months’ Supply:
The seasonally-adjusted estimate of new houses for sale at the end of July was 309,000. This represents a supply of 5.9 months at the current sales rate.
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. 2018 is looking exactly as I expected. Even if the growth in sales falls in upcoming reports, we should still be able to hit my 2%-5% growth predictions for the year.
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