New Home Sales: What A Difference A Year Makes


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 725,666 and monthly supply running at 5.33 months.  * First Time In This Cycle We Had 3 Prints In A Row Over 700,000

Year to date, we are running at 682,600 sales with monthly supply at 5.86 months.

Last year at this time, this was what we were looking at.

Monthly supply spike over my critical 6.5 months level.


HMI data looked like a waterfall drop.


New home sales headline prints were sub 600 levels and showing negative year over year data.

December-New-Home-Sales-Adj-population (1)

Back then this is what I wrote on December 18th, 2018

The Housing Market Has Materially Changed… But

“Despite the terrible optics for the new home sales market, I caution everyone not to assume that we have hit our peak and are heading for an epic crash in housing starts and new home sales.  New home sales and starts are still very low. In order to lift the dark cloud hovering over the new home sales, we will need to see the following:”

“You need to see monthly supply get back down below 6.5 months and new home sales show trend growth of 640K with revisions confirming this.” 

Now, November 2019 data.

Monthly supply data while still higher in this cycle than the previous cycle where demand was really booming (Housing Bubble). This data line needed to get back down for housing starts to grow again. I can’t emphasize this enough; you’re all told that we need more homes, and I tried to stay consistent with my thesis for years. The builders build off demand curve cycles, not what anyone says on CNBC or twitter finance. This is how the world works for decades. Why are housing starts still negative? Because we had

“Excess Housing Supply.”

Some in the financial world would throw holy water on me for saying this. Those who have followed my work over the years know that this has been my theme from 2008-2019. We will never hit 1,500,000 starts because demand would never warrant it. You really need to start a Calender year at 733,000 to even remotely talk about 1,500,000 housing starts. That is something we can address in the year 2021, maybe.

Now! Monthly supply is back down to a level to where we can speak of flat to slightly positive growth next year, which is a huge deal not for housing only but for the economy.

Yes, housing starts are still a negative year to date, but the trend is getting better, so as long as monthly supply stays below 6.5 months, we are right!

From Fred:
November Monthly Supply

HMI data has made a robust comeback.

November HMI

New home sales are outperforming so much this year that it’s going to impact next year’s forecast.  First world problem. 

November new home sales

From Census:

New Home Sales

Sales of new single‐family houses in October 2019 were at a seasonally adjusted annual rate of 733,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 0.7 percent (±20.4 percent)* below the revised September rate of 738,000, but is 31.6 percent (±23.7 percent) above the October 2018 estimate of 557,000.

Sales Price

The median sales price of new houses sold in October 2019 was $316,700. The average sales price was $383,300.

For Sale Inventory and Months’ Supply

The seasonally‐adjusted estimate of new houses for sale at the end of October was 322,000. This represents a supply of 5.3 months at the current sales rate.

My best advice on this sector of the economy is not to over hype the new home sales data. We have taken a recessionary data line off the recession watch grid this year from this sector.  New home sales were flagging a recession red flag, and then control and core retail sales had weaker year over year growth prints as well.  That part of the economy is looking better now so that in itself is a victory for this expansion. Now we have to get back to the typical issues of why this housing cycle has been the weakest demand cycle in new homes and housing starts ever. However, for this year, 10% year to date sales are the most prominent housing beat of this economic expansion. Naturally coming from a recessionary red flag data line and having rates drop as much as it did, the comeback is legit, but don’t call it a comeback because as long as rates don’t rise too much, the slow and steady cycle has legs to be here for years. However, be mindful of the housing market when the 10-year yield gets to 2.62% and rises higher.

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