Reclaiming Common Sense

New Home Construction is a economic engine for the current economy. New Home Starts, units and construction, and new homes being completed need construction workers, professional services workers, new construction boosts Home and Garden sales  and  Furniture and Furnishing Sales, among other opportunities for growth. Gross Private Domestic Investment is a factor in Gross Domestic Product Growth, as are personal consumption expenditures. Growth is good. There are many ways to look at the real estate data" New Construction, New Home Sales, and Existing Home Sales. The release dates for the various reports are:

  • New Home Construction: September 19
  • Existing Home Sales: September 20
  • New Home Sales: September 26

There are many components to the reports. This column focuses on the New Home Starts, Units under Construction, Units Completed, New Home Inventory, New Home Sales, Existing Units Inventory, Existing Homes Sold, and Average sales price of new and existing home sales. This column produces article on all three reports and uses the month to month changes, same month changes, rolling year changes, and current year changes to project what may happen this month. All of the data referenced is the non-seasonally adjusted data.


New Home Starts should break through the 80,000 units level. We have not had over 80,000 starts during August since August of 2007 when we had 86,600 units started. Builders have to start homes 4 to 8 months ahead of when they intend to sell these homes. The month to month data indicates that we should see 74,000 to 82,000 units sold. The August versus August Growth rate indicates that we could see 78,000 to 90,000 units sold. The current year data indicates that we are 50,000 units ahead of where we were last July. If we maintain this growth then the current year data should be at 626,000 units for the year, up from 558,000. The actual growth rate for the current year indicates that the starts are building momentum and may hit 645,000 units, or an increase of 87,000 units. The rolling year, lagging year indicator is pointing to a number over 90,0000 units, and appears to be the outlier. New Home Starts are trending with 1992 and 2017. If we fall between the 2017 and 1992 levels that would place us at 634,000 units, or roughly a gain of 76,000 units. Expect a number between 82,000 and 87,000. Do not be startled if it comes in over 90,000.


Homes under construction should continue to grow. We were unable to sell new homes after the recession because they were not under construction. Starts add to the units under construction and completions remove units from the under construction vale. The under construction data, for all intents and purposes, is a rolling year and current year data. The month to month growth is projecting a value between 1.19 million and 1.36 million units. The August to August growth data is projecting a value between 1.14 million units and 1.25 million units. Last month we had 1.145 million units under construction. Starts may be slower than completions, so a 1.14 million value is possible. That said, the under construction value could be over 1.2 million. Expect a number between 1.14 million and 1.20 million units.


Completions are pointing higher - much higher. Builders want to compete homes before the end of the year. Buyers want to be in their new homes for Thanksgiving, Christmas, or any of the other end of the year holidays. The month to month data indicates that we should see completions grow to between 100,000 and 121,000 units. The August to August growth indicates a value between 108,000 and 123,000. The current year growth is indicating that we we have a total of 785,000 completions for the year, a growth of possibly 108,000 units. If we are trending with 1992 and 2017 then we could add better than 102,000 units or 105,000 units. If we can imagine that we are trending with 1983 we could add over 150,000 completions. This is unlikely.  The rolling year growth rate is projecting a value of as high as 116,000 units. Expect a value between 108,000 and 116,000.


New Home Sales will be dependent upon Inventory. The Inventory level is up 8.3% over last July. If this trend continues then the inventory should jump by at least 8.3% from August 2017's 284,000 units. to 308,000 units. The slope of the curve is significant. This will place us at a higher level that August 2001. Previous articles have proposed that an inventory level between 300,000 and 400,000 units is healthy, on a national level. The value may be closer to 375,000, and it could increase from their due to the expansion of the workforce population since 2003.


New Home Sales should break through the 50,000 level. We traditional see in excess of 55,000 units sold during August. We dropped to less than half of that during the Housing Recession. The month to month growth is projecting 52,000 to 54,000 units sold. The August to August growth is projecting 49,000 to 52,000 units. The rolling year growth rate is 6.71%. The Current Year growth rate slightly exceeds that value at 6.73% This would boost our sales by 48,000 units to . 450,000 units sold year to date. We are trending with 1983 when we sold 50,0000 units, 1994 when we sold 59,000 units, and 1989 when we sold 61,000 units. This data indicates that 55,000 to 60,000 is possible. Look for a number around 54,000 to 56,000 units sold during August.


Is another New Home Sales Price Record within reach? The month to month data indicates that the average sales price could drop 1% or rise as much as 3%. This change from the July price would yield $390,000 to $406,000. The August to August change is projected between 3% and 7%, which yields an average sales price of $380,000 to $395,000. Shelter costs have been rising by 3% or more for an extended period of time, according to the Consumer Price Index Data. Even $380,000 would be a record for the month of August. Expect a number of $394,900, and do not be surprised either by a value of $380,000 or $399,000.


Inventory Matters - Expect a drop in August Existing Home Inventory. We have seen years where the number of existing homes have increased from July to August. If the inventory level increases, it does not do so by that much. The question is will we remain above last August's "historic" low inventory level? Remember that this data is only available back to 1999. Expect the inventory level to be between 1.87 million and 1.95 million units, most likely lower than 1.9 million units.


We are past the June 30th historic peak for units sold. We sold fewer homes this June than last June, and we sold more homes during July this year than July Last year. Inventory matters. The month to month data indicates that we could see 532,000 to 558,000 units sold. The August only data indicates that we could see 529,000 to 567,000 units sold. Current Year growth is 1.59% lower than last year. This would place us at 526,000 units sold this month. We are tracking with 2002, when we sold 549,000 units, 2006, when we sold 539,000, and 2017, when we sold 535,000 units. The past 12 months data, the rolling year data, is pointing toward 0.17% growth or a value of roughly 536,000 units sold. The current level data is "contracting" so the 536,000 appears to be setting the top of the range. Whatever the number, expect the experts to be disappointed. Expect a number under 549,000 units and over 532,000, or roughly 541,000 units.


We hit the highest monthly average sales price for 2017 during December. We saw a huge spike in the average sales price from June to July this year. The average price has been steadily rising for six years. The month to month data is indicating a change of a drop of 1% to a drop of 3%, placing the average sales price between $298,000 and $304,000. The opposite is true for the August to August data. The same month data is projecting 3% to 5% growth. This growth places the average sales price between $303,000 and $309,000. Either scenario sets a new August record average sales price. It is a case of supply and demand. Demand is still relatively strong by historic standards. We have more full-time workers.We are returning back to "normal" and should expect sales comparable to 1999, 2000, 2016, and 2017. The sales volume from 2001 and 2002 are not out of reach.


What can we expect over the next two weeks?  New construction should continue to see improvement in units started, units under construction, and units completed. This should grow the inventory, which should allow for more homes to be sold. Existing home inventory appears to be stabilizing. Prices appear to continue to grow at a rate of at least 3% for new and existing homes. Remember that all real estate is local and that this is a national snapshot. Home values are based on condition, supply, demand, location, and motivation of both the buyer and the seller. Some years one style of home or condominium outpaces another in a given market. A market can be a condominium complex, a neighborhood, a school district, or a community. Consult with a REALTOR to find out what is happening in your market.


It's the economy.