Jack Dunn - Reclaiming Common Sense

Seriously Strong New Construction Data being Actively Ignored


The April New Construction data was released to little fanfare. The projections published in the April Real Estate Forecast article was for new home single family starts to rise above last year's April level of 76,900 and to break through the 80,000 level. It was projected that units under construction should also surge from last April's 1.071 million units to 1.12M to 1.16M units. It was estimated that completions should surge through the 80,000 level and even the 90,000 level, and could approach 100,000 units completed. Last April we saw 83,400 units completed. The April New Construction Report can be found here. It is article CB18-71.


Single Family started climbed to 84,300 units. This jump bodes well for stronger new home sales within four to six months. It was up from the March level of 73,100 and higher than any month last year. Total starts grew from 107,500 during March to 117,600 this month. This, too, was higher than any month last year.


Units under Construction almost hit 1.12 million units. The 1.119 million units was a mere  thousand units short of 1.12 million. Again, thus is higher than any month last year. Single family units clocked in at 502,100 units, higher than any month last year.


Completions were up from last month and Last April at 95,100 units. Completions picked up the pace last year starting during June. This level of completions is higher than April 1990-1992 and April 2008 through April 2017, April only. (Note all of this data is the non-seasonally adjusted data provided is the non-seasonally adjusted FRED data, and is also available through the census website for new construction.)


The Starts, Under Construction, and Completions are strongest in the South Region, followed by the West Region. The new construction data is important because it gives a glimpse of what may be reported for new home sales during June through December. New home construction is an economic health elixir. New construction means more construction jobs, more retail sales, more financial activity in the form of loans, appraisals and inspections. More activity requires more workers. Often, not always, people who have existing homes that need to be sold. The new home market is a fraction of the total real estate market. New home Inventory has been rising to meet demand. It will be interesting to see if new home prices start to drop to levels of existing home sales to pick up the slack.


We will be receiving new home sales data next Wednesday, May 23rd, and existing home sales the following day.  The non-seasonally adjusted data has been good even with historically weak inventory levels for new and existing homes for sale.


It's the economy.