Reclaiming Common Sense

Finally! The Government Shutdown data delayed December New Construction Data has been released.

This column published an article "December Real Estate Surprise Forecasted" projected the potential outcomes of the December New Construction data, the December New Home Sales Data, and the December Existing Home Sales data.

  • December Starts have been sluggish for years - may surprise to the upside.  There is the possibility of 57,000 to 64,000 units started.  The Magic number appears to be 57,000 units, plus or minus 4,000 units.
  • Units under Construction may drop this year between November and December. Builders are pushing to clear inventory by the end of the year. It was likely that we would have between 1.145 million and 1.152 million units under construction during December.
  • Units Completed were expected to  could soar during December. current year data put the "floor" at 118,000. while the month to month and two month data indicated a range between 110,000 and 120,000.

What was reported in the December New Home Construction report?

New Home Starts for December came in lower than expected - still finished the year at best level since 2007. You may be reading elsewhere that the new home starts data dropped 10%, from a seasonally adjusted 812,000 total units to 758,000 seasonally adjusted. This is not the true picture. This year the non-seasonally adjusted data for December was 71,700 total units, down from 81,400 last December, non-seasonally adjusted. The end of the year data came in at 872,700 units, up from 848,900 during 2017, which was up from 781,500 during 2016. This was the best year since 2007. It was better than 2008, and obviously better than 2009, 2010, 2011, and 2012. While the 49,000 units was lower than projected, it was still within the realm of possibility that it could have been as low as 48,000 units.

Units Under Construction during December edged higher from Last December, dropped from November.  The NSA under Construction data dropped from 1.1497 million to 1.1177 million units. This sounds bad. Once again, while this was lower than projected it was within the range of possibility. It could have been as low as 1.1103 million units.  This level was better than we had during December 2017 when we were at 1.105 million units

Units Completed stumbled from December,  jumped from November this year. The non-seasonally adjusted data came in at 103,700 total units completed, up from November's 94,700. This was off from last December's 113,400.  The low end of expectations, based on month to month changes, was between 95,200 and 110,000 units, so this was also within expectations.  Once again, even though this was weaker than expected, the end of the year data was stronger than the end of the year completions data for 2008-2017.

The units completed data is, in some ways, more important that the starts or under construction data.  Once the units are completed they can be sold. Also, the units under construction data is near historic levels, which means that either we are building up "too much" potential inventory or we have a lack of finishing construction workers. There is not "too much for sale" as we just recently broke through the 300,000 units inventory level after nearly a decade below that level. More completions means that we should have more inventory when it is reported March 5th.  This is a huge delay We should be receiving the February data during March, not the December data.  The January and February release dates have yet to be determined.

The New Construction data was weaker than projected, in some ways, and stronger than is being reported elsewhere. It is tough to argue with the best end of the year data since 2007. This is the nature of real estate, slow months can be breakout months and sometime slow months come  in slower than expected. Remember the Polar Vortex? It chilled end of the year activity. Maybe people were out shopping for stuff instead of finishing construction work.

It's the economy