Reclaiming Common Sense

Solid, not Historic, June New Home Data, and That's Okay

The June New Home Sales Reportwas released to some level of disappointment. This is a little confusing. The June Real Estate forecast article discussed how the June new home sales could be down from the levels recorded during April and May and should grow beyond last June's level. The June level did not exceed 60,000 units, which was a little bit of a disappointment. It was off the peak sales of March, April, and May, which was seen as a possibility. We need to see how it did compare to last June, Last Year through June, and the rolling year sales, as well as inventory.

New Home units squeaked out a slight gain over June 2017. Last June we saw 56,000 units sold. This year we saw 57,000 units sold. Some years we exceed 60,000 units. Some years we have exceeded 70,000 units. We did better than June 1991 and June 1992, and came close to June 1993. This sounds terrible. It is considerably better than where we have been during the past  10 years. 

The Average Sales Price  retreated from the June high of last year, and dropped slightly from the May 2018 level. We saw a similar retracement during June 2015. There are some who believe that there is some price sensitivity as the interest rates rise.  I remember when new home rates were 10%, 9%, 8%, 7%, 6%.Money is still cheap.

The Seasonally Adjusted annual sales rate is projected too low.  The seasonal rate last year was 616,000 during June. This year it is 631,000. Last year, calendar year, we sold 622,000. Last year we had sold 327,000 units by the end of June. This year we are at 350,000. That is a 7% growth rate. This pegs the end of the year data at 658,000 units. If we continue growing at this rate We could approach 700,000 units by the end of 2019. Time will tell how long the increasing level of sales will continue. We do see a dropo in year to year sales even as the general trend remains higher over a 3, 4, 5, or even a 14 year period of time. 

The Rolling Year Data jumped to 637.000 units. Last year the June RY data was 596,000. This is an increase of 6.8%. This means that if we grow at this rate we could see a rolling year data point of 680,000 by next year. The projected current year data is greater than the rolling year data, so sales are expanding. 

The Inventory level broke through 300,000 for the first time since April 2009. This may not sound like a significant feat to some observers. The normal inventory level of new homes is between 300,000 and 400,000 units. You can't sell what is not for sale. There can be "too many" homes for sale. The comfort zone, for the market may be under 400,000. There may be some pent-up demand from the Great Recession.

We are ahead of where we were last June for rolling year sales and for current year sales. Sales of new homes can drop during June and they did. Inventory was expected to exceed 300,000 units, and it did. These sales bode well for future retail sales data. This bodes well for future GDP data. We are nowhere near the go-go levels of 2004-2006. It may take a decade to reach those levels. That's okay. Slow and steady wins the race.

It's the economy.