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).
We are blowing this house party off the charts now.
With revisions now.
3-month sales trends are running at 702,666 and monthly supply running at 5.6 months.
Year to date we are running at 673,500 sales with monthly supply at 6 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. If we can keep total new home sales between 650,000 – 670,000 that in itself would be great for 2019. You don’t need to see the 3-month sales average grow from 702,666. All you need to see is the revisions hold up these better sale numbers.
My last title for my housing starts article was: Housing! It’s Alive It’s Alive
New Home Sales
Sales of new single‐family houses in August 2019 were at a seasonally adjusted annual rate of 713,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.
This is 7.1 percent (±20.3 percent)* above the revised July rate of 666,000 and is 18.0 percent (±19.9 percent)* above the August 2018 estimate of 604,000.
The median sales price of new houses sold in August 2019 was $328,400. The average sales price was $404,200.
For Sale Inventory and Months’ Supply
The seasonally‐adjusted estimate of new houses for sale at the end of August was 326,000. This represents a supply of 5.5 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. The key story for housing in 2019 is this V shape recovery that has happened due to lower mortgage rates. Don’t overhype this story; housing bulls tend to get ahead of themselves, which gets them in trouble later on when rates move higher. However, the most crucial story for housing this year is that the excess supply of homes has come down. Yes, housing starts are still a negative year to date. But, have the right setting for flat to positive growth coming soon to the U.S. economy from housing starts.
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