Jack Dunn - Reclaiming Common Sense

We received the February New Construction data last week, along with a whole host of other data.  The February New Construction data was slightly chilly. We saw some improvement in the starts data over February 2016. We some improvement with regard to the February Completions data compared to February 2016. The problem is that the data is still historically weak.The rolling year data for starts and completions are still slower than what we saw between 1984 and 2008. The best number that has been reported during the past year is the under construction data. We have property coming on-line to absorb the demand that cannot be satiated by the existing home inventory. New home sales created synergistic retail sales in the furniture sector, the electronic and appliances sector, and the Home and Garden Sector. So what happened this month?

The Average Sales Price for New Construction Homes Soared to over $390,000. The average sales price last year was under $350,000. This is a huge spike. The median sales price, that price above which and below which an equal number of homes sold, fell from last February's Median Sales Price. This skewing of the average mean that fewer homes with higher sales prices are being sold above the median sales price. Normally the difference between the average sales price and the median sales price is ignored.

The Number of Units Sold improved for the sixth straight year - still below the 1992 through 2007 February Level.  The number of units sold fell short of 50,000 units. We sold more units, every February, between 1996 and 2007.

The Rolling Year data is slower, lower, than February 1984 and February 1993. This is important because the authors of the report are saying that new homes are selling at a pace of 592,000 units. If you examine the rolling year data we are currently at 566,000 units. This is slower than the pace we saw in 1993 when 666,000 units were sold by year's end, and slower than February 1984 when 639,000 units were sold by the end of the year.  If we are selling 30,000 to 80,000 fewer units now, then we may selling closer to the 550,000 to 560,000 range. Last year we sold 560,000 units, after the final revisions to the sales data. We have at least 13 years of growth ahead of us to get to the February 2006 level. Was that "too high?" Maybe. Is 592,000 possible? We have the inventory.

The data for Prior Months were revised every which way. The Average Sales Price for November 2016 and January 2017 were revised down, December 2016 was revised up to $385,700.  The Annual rate of sales were revised down for November and December and up for January. Notice that the seasonally adjusted data for December was revised down while the non-seasonally adjusted data was revised higher than previously reported Starts are higher than last year. Completions and under construction are higher than last year. Will this inventory pick up the slack for the lack of existing homes? Time will tell.

It's the economy.