A rule of thumb for me on the new home sales market and housing starts have been this.
As long as monthly supply stays below 6.5 months with rising sales, we can get growth in housing starts!
Today new home sales came out as a beat, but the most critical housing chart we have in America is getting better. The monthly new home supply is below 6.5 months and currently at 5.6 months.
New Home Sales
Sales of new single-family houses in May 2020 were at a seasonally adjusted annual rate of 676,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 16.6 percent (±15.5 percent) above the revised April rate of 580,000 and is 12.7 percent (±23.5 percent)* above the May 2019 estimate of 600,000.
The median sales price of new houses sold in May 2020 was $317,900. The average sales price was $368,800.
For Sale Inventory and Months’ Supply
The seasonally-adjusted estimate of new houses for sale at the end of May was 318,000. This represents a supply of 5.6 months at the current sales rate.
Yesterday for HousingWire, I talked about how the existing home sales report didn’t reflect the real fundamentals of the housing market.
Regarding the new home sales market, remember that we just experienced the weakest housing recovery ever recorded in history. So, we don’t have an overheated housing market running into the best demographic patch ever in history with meager mortgage rates. Year to date sales is still positive up 1.9%, even with lockdown protocols hitting housing hard earlier in the year.
Slow and steady wins this race, and the new home sales market is susceptible to mortgage rates. Even at 4.75%-5%, which is historically excellent, shutdown the housing construction rate of growth. However, with where mortgage rates are today, this sector has legs to walk higher. Of course, we still have to deal with this virus, and we still aren’t back to full America is Back just yet.
Updated Model Below:
Logan Mohtashami is a housing data analyst, financial writer, and blogger covering the U.S. economy with a specialization in the housing market. Logan Mohtashami, now retired, was 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 Facebook page. https://www.facebook.com/Logan.Mohtashami and is a contributor for HousingWire.