Reclaiming Common Sense

December was a lackluster month for new home construction and for existing home sales. The same could be said for the new home sales data. The units sold have been fairly consistently better than prior years, month after month. The problem is that where the media is saying that it is the "best in almost a decade" forget that it is worse than we saw during the 1980s, 1990s, and early 2000s. The housing market is getting a "D" where it used to get an "F."Remember that all real estate is local, community, school district, neighborhood or condominium complex,  as you read this column. The national picture is a 30,000 foot level view.

New Home Prices Set a record for December. If you are buying, you might not like this. Interest rates are rising. This will get some people off the fence and knock others off the fence. We saw an upward revision to the November Average Sales Price (ASP) to $365,200 and a downward revision of the October ASP to $339,900

New Units Sold remained unchanged from December 2015 at 38,000 units. WE were selling 50,000 to 55,000 units a month during March, April, May, June, and July of this year. We should see 50,000 or more units sold during December.  The units sold for October were revised up from 45,000 units to 46,000 units. The sales data from November were raised from 41,000 to 42,000.

The Sales Data for 2016 came in under 570,000 units - The Annual Pace had been as high as 622,000 Units. We saw the annual sales revised from 571,000 down to 568,000 for September. October was revised up from 563,000 to 571,000. November had the target revised up from 592,000 to 598,000. The number of units sold during 2016 dropped slightly from the 538,000 level last year to 536,000 this year, according to the authors of the report.We really sold 562,000 units last year, calendar year. The annualized rate is what they report. They are looking at 536,000 units to be sold over the next twelve months. The new construction data indicates that we have an oversupply of homes.Table one of the report indicates that we have 6.7 month supply compared to a 6.2 month supply last December.

The Rolling Year Data is 562,000 - Slower than 1983 and 1992.  This pace of sales was unchanged from the November level, after revisions. This pace is faster than the 545,000 pace seen during December 1980 and faster than the pace of 535,000 seen during December 1990. It is also slower than the pace of 608,000 units sold during 1992 and slower than the 622 units sold during 1983. We see a peak and trough pattern. There was a peak during the Middle of the 1980s that hit bottom during 1990. We saw a pause during 1995.  We saw a pause during 2000.  The rocket launched during 2002 and hit its apex during 2005. If it took 22 years to get from the December 1983 level to the December 2005 level are we going to experience a similar malaise?

The past thirteen months have been unremarkable. We have had better months for Average Sales Price, Units Sold, Units for Sales.

Across the board we have seen better Decembers since 1975. We are doing better than 2008 through 2015. That is a very low bar. The trend is up. Down is not really an option. The lack of sales and the rising inventory levels may mean that new home prices will fall. They may rise even more than they already have due to a lack of existing home inventory. The next three months will be very telling.

It's the Economy.