Reclaiming Common Sense

The January New Home Sales was Released this week.

The January New Home Construction data was  overlooked last Friday.

The January New Construction data was released to little fanfare last Friday because it was released the same day as the February Jobs Report. The new construction data had good data  for Starts and units under construction. Completions are a different story.

The New home sales data revealed stabilizing sales data. The January New Home Sales report revealed identical sales to January 2017 and slightly fewer sales than January 2018. This may be a result of the Government Shutdown. Loans have to be approved through the federal government. They were shutdown mid-December through mid-January.

The Average sales price eased back from the record January level of last year. This average sales price was still higher than it was during January 2017. The average sales price was $361,800 during 2017, $377,800 during January 2018, and $373,1000 this January. The difference between the average sales price this year and last year can be found in the the number of units for sale between 200,000 and 299,000 and for those priced between $400,0000 and $499,000 and $500,000 and $749,999. There were 37,000 units sold between 200k and 2999k this year compared to just 27,000 last January. The number of units in the two higher price ranges dropped from 14,0000 units and 15,000 units, respectively, to 11,000 apiece this January. More selling at a lower price and fewer selling at a higher price will pull down the average sales price.

It is important to note that the median sales price was nearly identical to the January 2017 median sales price of $317,400 at $317,200.  What this means is that the average sales price was skewing higher last year, the market was top heavy, skewed right, and that it is less top heavy this year.

Inventory was up for January compared to January 2018, and off the peak inventory this past Summer. Last January the inventory level was 294,000 units. This January we stand at 336,000 Units. The 350,000 level is within reach. Normally the inventory is between 300,000 and 400,000 units. We were not selling as many homes as possible from 2010 through 2018 due to a lack of inventory.

This New Home Sales report was not too hot, nor too cold. The possibilities are that the average sales price fell as builders attempt to back-fill the existing home inventory with lower price new home inventory. New home sales tend to sell for roughly $100,000 more than existing homes.

We saw the most January Starts since 2007. Last week's release of the January New Construction data was buried by the release of the February Jobs Report. The New Construction Report, as well as the New Home Sales Report, were delayed by the Government Shutdown. This is normally a good sign for the Units under Construction data and the Completions data down the road.

The Units Under Construction were the most since 2006.  If you look at the histogram for the Under Construction data you will find that the numbers are still growing, just slower than it has been growing. The peak years were 2004 through 2006. We saw peak new home sales during 2005 and peak average sales price, ore-recession, during 2006. The Housing Recession began during 2007 and continued through the Spring of 2010. The Housing Recovery has been ongoing since the Spring of 2010.

The Completions data is not as good as the Starts data.  If you look at the data for Completions you will see that we are at levels not seen since 2015. We are coming off the best new construction year for Starts, Completions and Units under Construction since 2007.

The Rolling Year data shows slowing growth.  The Rolling Year Starts data is better than it was January 2018, so things could be turning higher from where we are right now. Completions, on the other hand, are slowing compared to last Summer and slowing compared to last January. It could be that the loan approval process for construction loans was impacted by the Government Shutdown. If there is a need for a final "draw" to be approved and it cannot be approved then the draw cannot be made. the rolling year graphs can be found here.

The Government Shutdown delayed the release of the new home sales and new home construction data. It also appears that the shutdown slowed down, or shutdown, the approval process, which in turn slowed sales. There have been some who have expressed concerns that the average sales price was rising too fast. The increase in sales in the $200k-299k range should mean more units sold during this year. This is some of the strongest data that we have seen since 2007. One month is not a trend.

It's the Economy.

Note: The February Existing Home Sales data will be released March 22nd, followed by the February New Home Construction Data March 25th, and the New Home Sales Data March 26th.