Strong December New Home Sales - Best Year Since 2006
The Monthly Existing Home Sales Report was released by the REALTORS this past Friday. Despite record low inventory, or in spite of record low inventory, December was the best December for existing home sales since December 2004 and the best end of year sales level since 2006. We also have the lowest existing home inventory ever recorded since 1999.
December Existing Home Sales hit 537,000 units this month. The Average Sales Price this month hit $342,400. This was a spike of 10.1% from last December's $311,000 and comparable to the record high of $344,700 set just this past October. The end of year sales number came in at 5.643 million units. We had 5.34 million units sold during 2019. The last time we had a level of sales this high was 2006 with 6.478 million units. Existing Home Inventory fell below 1 million units for the first time ever.This was covered in the article "Best Existing Home Sales Year since 2006."
A shortage of Existing Homes should boost new home sales. The problem is that it takes time to "grow a crop" of homes. We need permits to grow, starts to grow, and units under construction to blossom, in orde,r from completions to exist and turn into sales. What is often overlooked is that the average new home sales price is considerably higher than the average sales price for existing homes.
The December New Home Construction data pointed towards the potential for a strong New Home Sales report. Last week we received data that showed the New Home Starts were up December to December, rising from 108,300 last December to 113,300 this December, or an increase of 4.6%. New Single Family Starts rose from 68,900 units last December to 89,300 this December, or 29.6%, up 11.65% for the entire year. Units under Construction rose from 1.158 million units to 1.244 million units, or 7.4% increase from last December, and the most units under construction during December since December 2006. We recorded the most December Completions since December 2005. This was covered in "2020 New Construction Ends Year with a Bang."
Most December New Home Sales Since December 2006. New Home sales jumped from 49,000 units during December 2019 to 55,000 units this December. The Great Recession of 2008-2010 was actually a Housing Recession that started after the peak of 2005. Sales declined through 2010, the bottom of the Great Recession.
Most Total Annualized New Home Sales Since 2006. The same pattern that we saw in monthly sales is reflected in the end of year sales. The headlines that some outlets were pushing was that this was an improvement from November's 829,000 annualized sales level. They are saying that this is well off the peak of 979,000 seasonally adjusted sales posted during July. New home sales and existing home sales tend to peak during March through June every year. The seasonally adjusted annualize rate of sales is where the authors of the report think we will be next December. Last December they were projecting 694,000 units. We hit 829,000. If you dig into the data that original 694,000 is now reported at 731.000. This is better than any year since December 2007 when we hit 619,000. We hit 998,000 during December 2006.
Most Total Year Sales of New Homes Since 2006. This year we had 810,000 total units sold, compared to 776,000 during 2007and 1,052,000 during 2006. Will be approach the seasonally adjusted annualized rate of 829,000 for next December? Most likely. The momentum should carry into January and February. We should have a better March and April than we had last year. It is dependent upon adding full-time jobs.
Ten out of twelve months outpaced 2019 levels. The two months that fell short were the peak of the Wuhan Flu were March and April of 2020. We not only saw improvement over last year's monthly sing ales, we saw dramatic improvement of 20% or more compared to the prior same month data.
December Inventory Up is Down. We saw seriously low inventory for the better part of a decade. Inventory started falling during 2007 before nearly becoming non-existent during the Summer of 2012. It took until June 2018 to eclipse 300,000 units for sale, nationally. Inventory fell below 300,000 units during April of 2009. Inventory rose from 289,.000 to 308,000 from November to December, non-seasonally adjusted. The problem is that inventory fell from 329,000 during December 2019, which was a drop from 348,000 during December of 2018.Up is down.
Rolling Year Sales and Current Year Sales were up 18.77% from the end of 2019. When the current year sales exceed the rolling year sales rate the market is expanding. When the Current Yer growth rate is lower than the rolling year growth rate the market is cooling. The rolling year and current year growth rates are identical during December, by definition. The growth rates were slowing, while overall total sales were rising. It has been thirty years since we had protracted rolling year/current year growth over 20%.
It appears that new home sales have picked up the slack for a dearth of existing home inventory. It also appears that there is an appetite for homes that cannot be quenched with the current level of starts, units under construction, and completions. The data from 2018 was an anomaly because we had a government shutdown lending. That same shutdown also shut down the release of economic data. The recent Pandemic Shutdown was a momentary pause while companies adjusted how they did business.
New Home Sales are a small fraction of the housing market. Last year we had 5.643 million existing home sales and 810mes ,000 new home sales. That is roughly a 7:1 ratio. New home sales tend to spur existing home sales as people who own homes sell their existing homes to buy new homes. New home sales also tend to spur retail sales as people buy new appliances and new furnishings for their new homes. Sometimes they even buy new cars for their new garages. This was a remarkable report.
It's the Economy.