May New Home Units Sold Climbing, Average Sales Price Rocketing Higher
Last week we received the new home construction data and report. The article "May New Construction Data, Recovery Continues" detailed how the starts data was at its highest levels since 2008, the under construction data was at the highest levels since 2008 and higher than we saw during 2001, and the completions data was higher than any May between 2008 and 2016. The April New Home Sales report was disappointing. The number of units sold during April 2017 fell from the April 2016 level of 55,000 units sold to 54,000 units sold. The average sales price fell from the April 2016 level of $380,000 to $368,300.Every so often there are unexpected peaks and valleys in the non-seasonally adjusted data. What happened this month?
The Average Sales Price now exceeds $400,000. This is a substantial premium compared to the May existing home average sales price of $294,600. The average sales price peaked at under $300,000 prior to the housing recession.
The Units Sold improved for the Seventh Straight May. It is important to place this into a longer perspective. The number of units sold this may were more than double what was sold during May 2010 and less than half of what was sold during either May 2004 or May 2005. This level is also lower than what was sold during the month of May from 1993 through 2007.
The Rolling Year data indicates that this improvement is substantial and has a long way to go. We have sold just shy of 600,000 units during the past twelve months. During May 1992 we sold 553,000 units. We sold 622,000 by May 1993. The growth rate right now is slightly less than what we saw during that 12 month time frame. It is also half the rate of what we sold during 2006.
The Current Year data indicates that the new home sales data is on track for 600,00-620,000 units sold. This year the data is just ahead of the 1992 data after five months and slightly behind the 1983 data after the month of May. The official Census Report Number for the Annual Sales Number is 610,000. This month the Current Year Chart is adding the data from 1993 for comparison sake. Is it possible that because we are 34,000 units ahead of where we were during May 1992 that we could be at 656,000 by next May? Either way, we appear to be on the right track and appear to be heading toward a year end sales level exceeding 600,000.
The main thing that is holding back sales is inventory. This is a chicken and egg paradox: Which comes first inventory or sales. Is this a "Field of Dreams Economy" where "If you build it they will come." If builders build will buyers buy? Here is where perspective rears its ugly head. We have fewer homes for sale now than we had for sale during the month of May from 1983 through 2009. If we do not have the inventory we cannot have the sales - it is a rate limiting step. We know that we have over 1 million units under construction. How fast can they go from under construction to "for sale?" The "for sale" curve looks similar to the "units sold" curve. Could this lack of inventory pull down the sales curve under 600,000 units?
New home sales and existing home sales are being held by inventory shortages. New home sales and existing home sales are at the best levels since 2008. Average sales prices are surging for both. Interest rates are at "historic lows." Money is cheap. Full-time jobs are replacing part-time jobs. Retail sales are increasing. We do not need the speculation we saw during the run-up in inventory through 2006. We need those people who are feeling confident in the economy to go out and buy a different home - new or existing.
It's the economy