Inventory Rising - Rolling Year Sales up 7.5% over February 2017
Last week this column produced forecast article for the new home construction data and the new home sales data. That article, "February New Construction Forecast: Hammering Ahead" projected strengthening new home starts, strengthening new homes under construction data, strong new home completions data, and improving new home sales data. The "Great Recession" was really three recessions in one. There was a housing recession, a jobs recession and a retail recession. These three recession also created a fourth recession, government revenue. All four components are observed in the Gross Domestic Product (GDP) data through the personal consumption expenditures (retail,) the gross private domestic investment (construction,) Import/Export data, and Government Consumption (spending.) Jobs are reflected in the GDP number virtually in all four sectors. Fewer workers, fewer homes built. Fewer new homes demanded, fewer jobs and less retail commodities purchased for new homes. Fewer jobs means less demand for imports and fewer people to create exports. Fewer jobs means less revenue and, in theory, less spending. The new construction data was released last Friday. "Feb. New Construction data: Building Momentum" detailed how starts were up 6.63% from February 2017, units under construction was 3.2% higher than February 2017, and completions spiked by 15.4% over last February.
The forecast article projected a record average sales price for February, in the high 380s and low 390s. It was was projected that we could see 55,000 to 60,000 units sold. The average sales price has exceeded pre-recession levels long ago. Units sold are still lagging behind pre-recession levels, both 2001 and 2009 recessions. So what happened?
New Homes Record February Sales Price. The Average SAles price bumped up from $370,500 to $376,700. A record sales price was anticipated. This was not quite as strong as was projected. What needs to be noted is that the January Average Sales Price was reduced by just over $5000 and the December Average Sales price was revised up by just over $4000.
New Home units Sold matched the February 2017 Level. There were 51,000 units sold across the country. It was thought that due to the elevated completion levels reported in the new construction report might carry over to sales.
Inventory improved - Just over 300,000 units. The normal level of new home inventory, prior to the Housing Recession, was over 300,000 units. The normal high level of inventory is right around 700,000 units. We had not had a February Level under 700,000 units for February from February 1997 through February 2008. This column said in the forecast article that it is difficult, if not impossible, to sell non-existent inventory. Inventory has grown by 16%.
Rolling year sales are Up 7.5% over February 2017. There have been 616,000 sold during the past 12 months. If we increase at a similar pace this year then we could see over 650,000 units sold during the next 12 months.
This was a good sales report. Inventory is returning to a "healthy" level. Inventory is growing at a faster annual rate than sales are growing.We have an existing home shortage, as has been detailed many times. Perhaps this new home inventory will relieve some of that pressure. The median price is lower than the average price, which means some high end homes are pulling up the average. If inventory grows at 16% for the year we could reach 350,000 by this time next year.
It's the economy.
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