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. ”
With the latest revisions for new home sales we ended the year with 2.3% growth. More importantly, the monthly supply data was revised lower. Monthly supply data for both November & December were revised to 6.3 months. This is important, if monthly supply breaks over 6.5 months, we have issues in the market. With these revisions in place, it looks like the spike to 7.2 months in October was a “one and done” for now.
For me to say that new home sales are back to its slow and steady growth trend we need to see at least 3 monthly sales print of 640,000 + with monthly revisions confirming this trend. Additionally, we need to have monthly supply back down below 6.5 months. It appears that the monthly supply data is on track to hit this metric.
In 2018 I wrote:
“I expect to see negative 3% to 1% growth in new home sales in 2019. The builders could discount to add some more business. I expect they will instead hope that lower mortgage rates will get them back on track”
While the headline number was a miss from sales estimate, the revisions to new home sales and monthly supply makes this the best new home sales report I have seen in 7 months.
New Home Sales:
Sales of new single‐family houses in January 2019 were at a seasonally adjusted annual rate of 607,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.
This is 6.9 percent (±16.3 percent)* below the revised December rate of 652,000 and is 4.1 percent (±14.0 percent)* below the January 2018 estimate of 633,000.
The median sales price of new houses sold in January 2019 was $317,200. The average sales price was $373,100.
For Sale Inventory and Months’ Supply:
The seasonally‐adjusted estimate of new houses for sale at the end of January was 336,000. This represents a supply of 6.6 months at the current sales rate.
1. Sales trends above 640,000 confirmed with at least 3 months of revisions
2. Monthly supply below 6.5 months confirmed with 3 months of revisions
Both of these factors are not reflected in this report. However, we could get a positive revision to this month’s monthly supply which would get us at least 3 months straight below 6.5 months. We still need at least 3 months of 640,000 units in sales with revisions confirming those numbers. The latest new home sales data should be a wake up call for all those predicting a housing crash and recession.
Since sales are still historically low, this sector has legs to walk albeit, very slowly. We don’t have over-investment in this sector which is a positive for the U.S. economy. Builders have the ability to discount and provide smaller homes into the mix to help this along. Discounts and more affordable, smaller homes are being offered recently and these things will result in more new home sales and promote more single family construction. If we see more weakness in existing home sales and more supply comes on to market, this poses a slight risk to new home sales in 2019. However, to put a positive spin on things — since this has been the weakest new home sales cycle ever recorded in U.S. history, during a record long economic expansion, new home sales have room to grow.
From Doug Short:
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