In 2018 I wrote:
“I expect to see a 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 for slow and steady growth instead of decreasing their margins.”
Recently I took the housing market out of the penalty box as long as sales trends stay above 640,000 and the monthly supply doesn’t go above 6.5 months (With 3-month revisions confirmation).
Today’s sales decline month to month was only due to a monster revision upward to last month’s report up to 728,000. Expect either a revision lower in sales to the previous month report or this report gets revised higher in sales, maybe a tad of both.
With revisions now.
3-month sales trends are running at 655,000 and monthly supply running at 6.2 months.
Year to date we are running at 661,000 sales with monthly supply at 6.15 months.
This data is good enough to start forecasting growth in housing starts in 2020 as the excess housing supply is being brought back down to a more acceptable level. Its still high for this cycle but as long as sales trend stay above 640,000 we are good
This is why my theme for my housing start article has been that permits have stalled for 31 months now. We need merely more consistent sales to promote growth. The reason starts have been negative this year is because we are still working our way out of the excess supply created late last year.
New Home Sales
Sales of new single‐family houses in July 2019 were at a seasonally adjusted annual rate of 635,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 12.8 percent (±16.2 percent)* below the revised June rate of 728,000, but is 4.3 percent (±14.0 percent)* above the July 2018 estimate of 609,000.
The median sales price of new houses sold in July 2019 was $312,800. The average sales price was $388,000.
For Sale Inventory and Months’ Supply
The seasonally‐adjusted estimate of new houses for sale at the end of July was 337,000. This represents a supply of 6.4 months at the current sales rate.
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 positive for the U.S. economy. Builders can discount and provide smaller homes into the mix to help this along. Discounts and more affordable, smaller homes are being offered recently, and this will result in more new home sales and promote more single-family construction. 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.
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