Reclaiming Common Sense

The February Real Estate Forecast Article projected improving inventory and improving sales

The Government Shutdown curtailed the release of new home construction data and new home sales data. This month we have already received the January new construction report, the January new home sales report, the February existing home sales data and the February new construction Report. Today we received the February New Home Sales report. The Government Shutdown appears to have "shutdown" the loan approval process for new and existing homes. This column produced a February Real Estate Forecast article that projected a bounce in new home sales, with 63,000 to 69,000 units sold a record February average sales price, easily beating last February's $373,600. and either stabilizing or improving inventory levels.

New Home Sales moved up to 56,000 units during February. The data from February 2018 was 54,000 units sold. This is the most units sold during the month of February 2007 when we sold 68,000 units. This is also a sizable bounce from the 49,000 units sold during January of this year. The 105,000 units sold during the first two months of the year is up from the 102,000 units sold last year at this time. This is also the best two month sales volume since 2007. While it was thought that we would see better sales this month, any improvement from the prior year's data is welcomed news.

The February Average Sales Price set another record at $379,600. We have seen some weakness in the average sales price as the number of high end homes has been easing and as the number of units for sale closer to the average sales price have been increasing. The median price came in at $315,300 meaning that there were more sales below the average sales price than above the average sales price.

The Inventory level is up 13.6% from February of 2018. The number of units for sale has "skyrocketed" since 2012. There was some concern that the number of sales were being held back by the lack of inventory. A "normal" level of inventory is between 300,000 and 400,000 units. This is a healthy level.

How does this reconcile with the "weak" February New Construction data? It wasn't weak. We did see weaker than projected new home starts. That said, the starts were within the low range of expectations. The Units under construction data was stronger than February 2018. The completions data were also up from February 2018. "February New Construction: Completions Up" dug into the details.

Two data points do not make a trend. The long-term trend for average sales price and inventory is pointing to improvement in the new home sales level for 2019. New home sales often shake loose existing home inventory as people sell their existing homes to build their dream homes. Existing home inventory has been improving, same month, year over year,  since August of last year. We have seen inventory improve for new home sales. These two conditions help boost the potential for both new and existing home sales.

It's the Economy.