Reclaiming Common Sense

 The Monthly Real Estate Reports for January have been remarkable

 New Home Sales spiked - Best January Since 2007


The housing industry is an economic stimulant. More new construction leads to more new home sales, more construction jobs, more retail jobs, more professional services jobs, and even more existing home sales. New home buyers are often existing home sellers. January tends to mean fewer starts, units under construction, completions, and sales compared to December, and more activity than last January.  Down can be up. It is also going to be important to watch the "seasonally adjusted annualized" start, units, completions, and sales.


New Home Sales spiked 16.3% from the January 2019 level.  The article "January Housing Forecast: Upward Momentum" examined the month to month data, as well as the January to January data, and projected that sales could spike by 8%, month to month, or drop 2%. It was not expected to drop due to the strong data that we have been receiving. It also looked like the January to January data could rise by 6% to 16%%. The spike of 16.3% from last January reflected an 18.75% gain month to month, non-seasonally adjusted. The 57,000 non-seasonally adjusted units was the best for January since January 2007.


Follow the bouncing Price Tag. The average sales price for new homes has been bouncing up one year, down the next, or higher to lower, depending on the month.This month the month to month data indicated an average sales price of $339,000 to $371,000. The annual growth indicates a range of $396,000 to $407,000. It seemed unlikely that we will see a $400,000 level this month.  The average sales price spiked to a record setting $403,200.


Inventory is the name of the game, and inventory could have gone either way this month. Inventory hit a multi-year high during January 2019. The level dropped throughout the year due to strong new home sales. The annual data pointed to a level comparable to last January, between  349,000 and 352,000. January to January spikes in inventory mean that we could see in excess of 360,000 units. Something in the 340,000 to 345,000 range seemed more reasonable. Inventory rose slightly from 325,000 units during December to 327,000 units during January. It appears that builders are having a hard time replacing the inventory that they are selling.


New Home sales tend to rise January through March. Last year we had ten months with more than 50,000 sales a month, with January and December being the "shoulder months." A stronger January s expected because January 2019 had massive headwinds.

The Seasonally Adjusted Annual Rate of Sales data was expected to be astounding. Last year the December 2018 SAAR was 564,000. January 2019 that number spiked to  It was expected that we could spike 10% from last January and eclipse 700,000 units and hit 708,000 units. It was also thought that we could jump 20% from last January's level and hit an SAAR of 772,000 units. We saw the headline SAAR spike by 18.6% to 764,000 units.


The SAAR for Sales was better this January than it was during any month last year. The SAAR peaked at 729,000 units during June of 2019. This was the best January SAAR since January 2007. It was the best month since July 2007 when it was 778,000 units. This number should have sent the stock market soaring. New home sales create spikes in retail sales.


All real estate is local. New home sales prices are based upon the State, County, City, School District, Neighborhood, size of the home, upgrades, and motivation of the buyer and the seller. The same could be said for existing home sales. All of the data discussed in this article is non-seasonally adjusted data, except the SAAR data. Contact a REALTOR to find out what is happening in the existing home market. Some REALTORS specialize in the new home market. Do your homework. Some homes are "over-priced" when they hit the market, some are under-priced (for a quick sale,) and some are priced "just right. The inventory shortage could lead to bidding wars. Know how much you can afford before you buy.


This week we receive the New Home Construction (NHC) and Existing Home Sales (EHS) data. Next week we will receive the New Home Sales data. New Home Starts, Completions, and Sales are in expansion mode. Existing home sales for 2019 exceeded 2018 levels with a spurt of sales during December. Is the momentum there for another year or two or more?


The current year growth rate exceeds the rolling year growth rate. The rolling year, or trailing year, growth rate tells us where we have been. The current year growth rate tells us where we might be heading. The current year data is the same as the current month data. We really need three or more months to detect a trend for the current year.  Sales have been growing double digits, same month, since August.


The Housing Recession impacted the whole economy. Existing home sales popped last month to boost the 2019 sales level past the 2018 level. New Home Starts popped. New Home Completions popped. January existing home sales popped last week. More popping is expected this year.


It's the Economy.