New Home Construction and New Home Sales Have Been Strengthening
Existing Home Sales have been coming off of Historic Lows.
Real estate is very important to the US Economy. Home owners have considerable equity locked into their homes. New home construction is required for new home sales. New home construction and new home sales generate synergistic retail sales and jobs. New and Existing home sales were slowed due to the Government Shutdown during December and January. Sales should accelerate through the end of June, and again around Labor Day.
New Home Construction was hit hard by the Great Recession. New home Sales and Existing Home sales soared through 2005 with average sales prices soaring through 2006. New Home construction and new home sales hit generational lows during the depths of the Great Recession. We have literally, and figuratively, seen a rebuilding of the Housing Industry since 2010.
New Home Starts should pop higher this April. Builder Confidence has been growing for years. Recently, there appears to have been a change in new home sales to offset the lack of existing home inventory. It takes time for New Construction to create new models to and build them. The data indicates that new home starts can jump 10% to 17% % month to month and 4% to 24% April to April. Last April we had 66,000 total starts, non-seasonally adjusted. We had 85,000 Units during March of this year. The data overlaps between 77,000 to 88,000 units with a top range of 105,000 units. The 88,000 mark seem s to be the low range of expectation. Expect 88,000 to 94,000 single family units to have been started during April.
Units under Construction Should rise month to month and year April to April. Units under construction plummeted during the Great Recession. We have seen over 10% growth in units under construction during he past few years. We have rarely ever been above 1.2 million units under construction. Units under construction are expected to rise 1% to 4% month to month and 4% to 10% April to April. This would yield 1.12 million to 1.16 million units under construction. Expect 1.14 million units.
Completions have been moving quickly during the past few months. The data indicates that completions could actually drop month to month and grow April to April. The month to month data indicates 95,000 to 102,000 units while the April to April data indicates 107,000 to 113,00 units. Normally when there is no overlap the data comes in at "the high side of the low side." We normally see units completed over 100,000 units during April. We have not seen this since 2008. Expect 102,000 units, and possibly 107,000 units completed.
The completions data has been better than the starts data for the past few months. The starts data had been better than the completions data during 2018. We saw a spike in construction jobs during April. The trend is our friend. Completions were ahead of the 2018 level during March (282,700 versus 267,500.) Starts are down from 195,000 to 180,000. Under construction is comparable to 2018 (1.105 million versus 1.119 million.) We could move ahead of 2018 levels of all three components with sold April data.
New Home Inventory has been soaring. The apparent "healthy" level of inventory is between 300,000 and 400,00 units. We have seen inventory decline during the past few months. We are still more than 10% ahead of where we were last March. Inventory may drop 1% month to month or rise 2%. April to April could increase 10% to 16%. This gives us a range of roughly 335,000 to 341,000 units. Expect inventory to rise based on current completions data. Expect it to fall based on recent sales data. Do not be surprised if inventory is unchanged at 338,000 units.
New Home Units sold should grow month to month and April to April. There is the possibility that new home sales could drop by 6% or grow by 6% month to month. The annual sales projects growth of 5% to 15%. Sales should fall between 64,000 units and 72,000 units, low by historical standards. Expect around 64,000 to 68,000 units sold.
The Average New Home Sales price could set a record or it could drop. The data is shifting. We have started to see the average sales price come in under the median sales price, from time to time. This means that the low end new construction is dragging down the mean. The average sales price could come in between $391,000 and $396,000. It could also come in around $380,000 to $385,000. Either way this is roughly $100,000 above the existing home average sales price. (All real estate is local.)
New homes are sold on "square feet and amenities." Location, Location Location" is "Square Feet, Lots size, and "that's an upgrade."" New home construction may be reaching down to backfill a lack of existing home inventory. Lots sizes may be dropping. All of this data is "30,000 foot" level national data. The new home construction data and the new home sales data is broken down by region, not state, not community, and not subdivision. The new home market appears to be up and moving after a long hibernation.
New home sales are "essential" to a strong economy. We have had numerous disasters between hurricanes, flooding, and wildfires that have obliterated some housing stock. New home sales prices are boosted by a "need" for profit, and are dependent upon labor costs and other input costs. New home sales generate construction jobs, professional business jobs, retail jobs, Building Material and Garden Equipment sales., and even restaurant sales. This is an economic multiplier. The starts, units under construction, completions, sales, and inventory levels should meet or exceed last year's April levels.
Existing Home Sales have been struggling due to a lack of Inventory. We had more inventory than buyers during the Great Recession. We had a glut of inventory between 2005 and 2012. The law of supply and demand applies to real estate. The existing home data is only available back to 1999. Inventory bottomed during December of 2017. We have been seeing same month inventory improvement since August 2018.Inventory is expected to grow for existing homes by 7% to 11% month to month and 2% to 5% April to April. Expect inventory to be recorded non-seasonally adjusted between 1.8 million and 1.9 million units. l
The increase in inventory is expected to increase the units sold from last year's April level. Units sold are expected to grow by 6% to 16% month to month, While it is possible that existing home sales could drop by up to 5% April to April, it is expected to grow by 1% to 5% from the April 2018 level of 460,000 units. Expect a number of units sold between 460,000 and 470,00 units, or roughly 465,000 units.
Shelter inflation has been consistently over 3.0%. Expect the average sales price to increase 3% to 5% month to month and 2.5% to 4.5% April to April. Supply has been low. Demand has remained fairly constant. A lack of supply will boost sales prices. Full-time jobs are required to purchase a home. We had fewer full-time jobs during January 2017 than we had during July 2007. Full-time jobs have been setting current month records since February 2017. We are two years into this full-time job growth. This could kick-start the housing market. It also means that people may have more money to spend on a home. This could spur sales prices by more than 3% this month. Expect a new record average sales price over $300,000. It may come in between $306,000 and $312,000.
Units sold are expected to jump month to month and even April to April. The data indicates that units sold should jump 6% to 16% from the March 2019 level of 400.000 units. This was a disappointing level of sales last month. We could see either a drop or a jump of 5% from last April's 460,000 units sold. The "bottom" of 424-437,000 units and a peak of 464,000 to 483,000. The two growth rates have an overlap at 464,000 units. The increase in the inventory from March to March is projecting an increase April to April. This should mean that the 460,000 level last April is the "floor." for this April. Annual sales have been declining so something under 460,000 is not out of the question. We are transitioning into a better market during the Spring Market. Anything is possible. Will we see 455,000 (a huge jump from March and a small drop from last Year,) or will we hit 470,000 Units? Expect 464,000 plus or minus 10,000 units.
The existing home market is very important to the economy. Lots of services are needed to make a home sale work. All real estate is local. Homes sell at market prices when a person who wants to sell, doesn't need to sell, meets a buyer who want to buy, and doesn't need to buy. Some years there are shortages in some price ranges, neighborhoods, school districts, or style of home. Scarcity boosts prices while oversupply depresses prices. We are not in an over-supply situation, as a whole. Contact a Realtor for your local conditions. Expect for sale signs to keep popping. Expect "quick" sales. Expect prices and units sold to rise through June.
One last thing: June 30th "has always been" peak closing day - this year it will probably be June 28th. This is a terrible day to try and schedule closings and movers. Try for the 26th or wait until the 1st or 2nd of July if you can.
It's the Economy.
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