Jack Dunn - Reclaiming Common Sense

Existing homes have seen improving sales prices and more units sold since 2007. The difference between new and existing homes is that just more existing homes are sold each month  of them and at a lower average sales price than new homes. There should be an increase in units sold from November 2017 and from December 2016. The rolling year value is 5.523 million units. The current year target is between 5.5 million and 5.6 million units. We would need 430,000 units to hit last year's total and 530,000 units to hit the 2002 level of sales.  It appears that the target is right between 439,000 and 471,000, or roughly 455.000 units.  This would be a huge improvement from last December and comparable to 2002. Inventory may hold us back here, as well.


Expect a new December Average Sales Price Record. Even if the average sales price drops 1% from last month we will still see a December record. The rolling year and current year values are roughly 287,000 with the current year value higher than the rolling year value.  Last year the values were $274,000. Expect a value over $287,000 and under $293,000. Will the December Inventory Level drop below 1.6 Million? Last year's 1.65 million units was the lowest since 1999. We are in uncharted territory. It is a supply and demand situation, again.


New Home sales normally exceed 50,000 units during December. We saw 50,000 then 60,000, then 70,000 units until we almost broke through the 90,000 unit level during 2005. The monthly change in sales should place the sales at 50,000 units. The rolling year value is at 609,000. The current year data is trending with 630,000. To hit 630,000 we would need to see either upward revisions to the prior month's data or an increase in sales of 60,000 to hit 630,000.  Expect a value between 45,000 and 50,000 units.


Could we see another December Record Average Sales Price for New Construction. Last year's average sales price was $390,000. This past month the average sales price was $377,100.  The Rolling Year and Current year values are both $375,000. Last year they were both approximately $365,000.  Expect a number between $385,000 to $405,000. It should remain under $400,000. Supply is short. Demand is solid


Expect a better December than last December. We are having the best real estate year that we have seen since 2007 or 2008 depending upon the month of the year.

New Construction is Surging - New Home Inventory is Still Low


The data for new construction feeds into the data for new sales. The data for existing home sales stands alone. The data can be analyzed from a rolling year standpoint which tells us where we have been. The data can also be examined from the current year trends. When the current year data is greater than the rolling year data the market is expanding.  The variables of month to month change and year to year same month change can give some insight as to where to expect the current month data to fall.


Single Family Units should see starts of roughly 60,000 units. We used to see December starts in the 70,000 to 80,000range leading up to the peak starts year s of 2003-2005. We saw November starts of 68,000 units. Normally we see a drop in starts during December due to the weather. The situation is that this is also a good time to get things lined up for a Spring and Summer Market. If the normal month to month decline coincide with December to December increases we have seen since 2010 we should see a value between 55,000 and 65,000 units unless builders are attempting to grow the inventory.


Units Under Construction should exceed 1.14 million and approach 1.20 million. The starts data will feed into the under construction number and the completions will draw it down. The inventory still needs to grow to accommodate sales for next year.The units under construction should exceed the 1.039 million claims recorded last December and should exceed 1.10 million from last month. The data has indicated a potential of 1.2 million for months. 1.14 million should be attainable.


Completions have been eclipsing 100,000 units lately. Last month there was a slightly unexpected drop in completions to under 100,000. End of the year pressure should bring it back up over 100,000 units. The Rolling year data is a low 1.142 million and the current year data is trending to 1.16 million . Completions should fall between 107,000 and 112,000 units with a value of 118,000 needed to hit the 1.160 million level.


Inventory is down from historical levels and up from where we have been for the better part of the decade.This has been a strong year for new home sales compared to where we have been, and it has gone under-reported.  Inventory will grow as starts continue to grow.

All real estate is local. Home prices are based on condition, location, amenities, and motivation. Both buyers and sellers may be motivated to make a deal before year end. Not all locations have properties with a sales price comparable to the national averages. Some have higher prices and some areas have lower prices.  The take-away for people with existing homes is that there has been a inventory shortage. Prices have been rising. If we see inventory improve, either during this reporting period or future reporting periods,  some pressure on prices will be released.


The good news for new construction purchasers is that it appears that there are more homes "in the pipeline." The same could be said regarding the existing home market. We have seen higher levels of inventory during the economic downturn. We have seen more units for sale during the run-up to the peak recession market. There appear to be investors who have absorbed some of these homes who are renting them or are holding out for higher resale prices. The monthly Consumer Price Index reports, including Friday's December CPI report, this year have revealed shelter inflation is running, and has been running, at over 3%. We can easily expect the average sales price to exceed $296,000 this month.


It's the economy.