New home sales have a multiplier effect on the economy. New homes generate jobs in the construction sector and the financial sector. New home sales spur sales in furniture and furnishings, electronics and appliances, and home and garden retail sales. The "Great Recession" was three recessions in one: A housing recession, a retail sales recession, and a jobs recession. The housing slowdown started after the Summer of 2005 as sales slowed even as the average sales price continued to tick higher. We saw Peak pre-recession jobs during the Summer of 2007. The "Ike Spike" in gasoline prices during 2008 was the "third ice storm" after the housing ice storm and the jobs ice storm. This Ike Spike caused a reduction in spending which spurred the retail recession.
What have we seen in real estate so far? This past week this column published an article "Dec. Real Estate Forecast: Up" in which it was projected that we would see an increase in new construction starts, new construction under construction, and new construction completions. It was thought that we would see a potential record average sales price for December existing home sales and a "return to normalcy" in units sold. The main concern was the inventory level. You cannot sell what isn't available for sale. It was also thought that we would see the best December for new home sales since December 2007 with a potential new record December Average Sales Price. The New Construction report was solid. Starts were up. Under Construction units were up. Completions were up. The Existing home sales data that was released yesterday was not quite as was expected. There was a new December Average Sales Price record established. We did not see an increase in December units sold. The problem with the number of units sold was created by a lack of inventory. We have a similar lack of inventory for new construction, even as the inventory continues to grow. So what happened with the new construction sales during December? How did we end the year?
We saw More New Homes Sold this December than any December between 2007 and now. The 43,000 units sold were not as strong as would have been liked to have been recorded. It was thought that we could see over 45,000 units sold. This is still getting us back to roughly 1995 levels of sales. There are many people who would like to see 50,000 units next December.
We set an average sales price record for December. You aren't hearing that anywhere else. It's all #ReleaseTheMemo and #LoomingSchumerShutdown.The Average Sales Price was just shy of $400,000.
The New Home Inventory level is rising - approaching 300,000 units. Whereas the existing home inventory is dwindling, new home inventory has been soaring. The 293,000 units level is comparable to 1993 and slower than 2001. The depth of the new home recession was under-reported. The number of units for sale almost dropped to 100,000 units. We had not had an inventory under 200,000 units between 1975 and 2009. This was huge.
The people who are reporting on the annualized rate of sales are hyperventilating for no reason whatsoever. Last year our annual rate of sales ended at 541,000 units. This year we sold 609,000 units. This is an 8.5% growth rate. If we grow by 8.5% . If this continues we could exceed 660,000 . The "official" annualized rate of sales is being reported at 625,000. Which is it?
This was a solid report. The number of units fell within expectations. The total units sold, seasonally adjusted, was the best since 2007. Report it.
It's the economy
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