New Home Starts have been lagging, Completions Have been Surging
New Home Sales on Track for Best Year since 2007.
There are three main real estate reports that this column examines: New Home Construction (NHC,) New Home Sales (NHS,) and Existing Home Sales (EHS.) The NHC and NHS data are used as a proxy for economic growth. NHC and MHS generate jobs in the construction sector and other sectors related to real estate, and they also boost retail sales. New Goods for New Homes. Existing home sales are nearly ten times greater than NHS. These three reports can be market movers.
The New Home Construction data feeds into the new home sales data. The inventory level was expected to fall between 336,000 and 349,000 units. It was anticipated that we could see the most July new homes sold since the recession, most likely between 52,000 and 56,000. The average new home sales price was expected to set a new July record and to break through $400,000. All of this was covered in "July Real Estate Forecast: Looking Up."
The June Data was revised up from an annualized rate of sales of 646,000 units to 728,000 units. The underlying data was the non-seasonally adjusted (NSA) sales were revised from 57,000 units to 66,000 units. The seasonally adjusted (SA) new home sales data was revised from 56,000 to 63,000 units. New home sales tend to peak during March, April, or May, not June. This means that every year the annualized sales level drops month to month after March. Last year the July annualized rate of sales was 627,000 units. This July the Annualized rate of sales was reported as 635,000. It should be noted that the July 2018 Annualized rate of sales was reported at 609,000 this month. The upward revision to the June data meant that there was an out of proportion drop in the annualized sales level this month.
The units sold crept higher to 53,000 units, up from 52,000 units last July. The level of sales this year was slightly lower than was projected. It is possible that some sales that may have happened during July happened during June. We have outsold the monthly sales of last year every month except May.
Current Year Sales are at their highest since 2007. We have seen 415,000 units sold through July. Last July we stood at 399,000 units. We had 375,000 through July of 2017 and 346,000 through July 2016. We are on-track with the sales that we saw during 1988 (675,000 at year's end - EOY ) and 1989 (650,000 EOY.) We saw 614,000 during all of 2017 and 617,000 units during all of 2018.
The average sales price was near a July Record High at $388,000. The record was set last July at $392,300. We have seen some ups and down this year depending upon the month of the year. We have either set records or just fallen short of last year's record.
Inventory rose from month to month and from July to July. We are still in the "sweet spot" between 300,000 and 400,000 units, close to 350,000 units. Last year we only had 313,000 units. Last month the inventory level was 329,000 units. This July we are at 335,000 units. New home sales cannot be made without new home inventory.
Ignore the television talking heads. The headlines were "US New Home Sales Slide 12.8% in July (Yahoo,)" "US new homes sales fall in July(AFP,)" and "U.S. new home sales drop sharply, point to more housing weakness (Reuters,)" One of the few positive headlines was from Marketwatch with "Forget July’s slump in new-home sales, mortgage rates are reviving the housing market." The sky isn't falling. The new home sales data is pointing to the strongest year since 2007. Strong new home sales, and solid existing home sales hat was released Wednesday, will boost retail sales and boost employment.
It's the Economy.
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