Real Estate is on the Rise. New Homes are Popping.
The Great Recession was not one recession, it was four recessions in one. The Gross Domestic Product is the yardstick by which recessions are measured. There are four main components to the GDP: Gross Private Domestic Investments (GPDI,) Personal Consumption Expenditures (PCE,) Imports/Exports, and Government spending. We saw housing decline after the Summer of 2005 through 2010. New Construction falls into the GPDI category. New construction, New home sales, and existing home sales help boost Retail Sales which are a part of the PCE Category. We saw a retail recession. When housing construction falls, and when existing home sales fall, employment falls. We had a jobs recession during the great recession. Over 10 million full-time jobs were lost at the depth of the recession during January 2010. If employment falls revenue falls. We saw revenue to the government fall during the recession. we have seen steady improvement to units sold for new and existing homes. We have not quite returned to pre-2005 levels of sales in either segment. We have seen new and existing home sales prices set records. As sales prices improve, owner equity improves. When there is equity in a home people feel better about moving. The main problem that we are having right now is a lack of inventory. What can we expect from the new home construction report, the existing home sales, and the new home sales reports.
New Home Starts, units under construction, and completions should all rise. New home starts should pick up the pace as the weather starts to improve. We have seen fairly steady growth in March units under construction since March 2012. We are still below historic levels of starts at last year's 69,500 units. Normally we have seen over 80,000 starts during March. The question is can we see another 10% bump from last March to this March as we did from March 2016 to March 2017? The data indicates that we could see 74,000 to 85,000 starts this month. Anticipate 75,000 units and do not be surprised with 80,000 units, or higher.
Units under construction have been surging for years. We have rarely had over 1 million units under construction. We saw these levels during 1984-1987 and 2003-2007. We eclipsed 1 million units last March. The trend data has been trying to push us to 1.2 million units. Last month we were at 1.08 million units. If we add 75,000 units that would push us to 1.155. We have to subtract some units that are completed or sold. We will exceed last year's level and last month's level. Expect the number to be under 1.16 million units and over 1.12 million units.
Completions have eclipsed 100,000 units during recent months, this should be one of them. We saw completions of more than 100,000 units during June, July, August, October and December of last year. Inventory has been rising. Sales have been rising. Once the homes are under roof work can be done to bring them to completion. If you want sales during March, April, May, and June you need completions now. Last year we had 92,000 completions during March. Based on February to March growth and Based on March to March growth we should see at least 100,000 completions and possibly as high as 113,000 completions. Expect over 100,000 units completed and do not be surprised by 110,000 units completed.
Construction jobs have been rising. More workers normally means that you have more units being started, under construction, and completed. This is good news for the overall economy. The New Construction report will be released April 17th.
Existing Home Sales spiked last March. Will Inventory dictate the number of units sold this March? The existing home sales data will be released the day prior to the new home sales data.March 23rd is the magic day for data for existing home sales. We can expect a record March average sales price and record low inventory for the month. The question is will inventory hurt sales this year or drive prices higher than expected?
The yearly trend has been for declining inventory since 2015. The 1.590 million units of inventory during February was the lowest recorded going back to January 1999. You cannot sell record level of units during a given month without increasing inventory. Traditionally we have 2.0 to 2.5 million units available for sale, nationwide, at any time during the year.
The trend for March sales has been moving higher since 2014. We used to see 438,000 to 446,000 units sold during Marc, prior to the boom-bust housing recession. We eclipsed 500,000 units during March during 2005, 2005, and 2006. While the growth data indicates that units sold could drop back to the 2016 levels, it is more likely that the units sold will be higher than last March and may approach 470,000.
The average sales price should set another March record. The February average sales price was already higher than the March 2017 average sales price. The CPI Shelter inflation rate is over 3% . The Average sales price should be up at least 3% from last month and from last year. Expect a number between $289,900 and $299,000. A $300,000 value is very likely this month.
The lion's share of real estate sold each month is existing home inventory. All real estate is local. Some school districts are hotter than other school districts. Some neighborhoods or condominium associations are in more demand than others. One year a home under 200,000 mat be the hot ticket in some areas of the country, the next year it could be under $175,000 or under $225,000. You need to pay attention to your market conditions. Working with a Realtor will help. You have to ask yourself will this home be gone if I/we don;t act now and how would "I/we" feel if we missed out on this home. Inventory is short. Days on market are short. Prepare yourself. Get pre-approved for a mortgage. Stimulate the economy. Get your home on the market while inventory is low and demand is high.
It's the economy.
New Home sales are an economic engine for our economy through jobs creation, service demand, and retail sales demand. We will receive the new home sales data April 24th. Expect another record average sales price for the Month of March and expect units sold to continue to improve.
Normally we see over 60,000 units sold during March. Expect us to return to normalcy. New home sales peaked for the month of March during 2005 with over 127,000 units sold. We saw a March low of 28,000 units sold. We have been recovering ever since that time. We did see a March to March jump of 10,000 units during 1995 and 1996. We have seen larger march to march spikes during 1986 and 2004. Both the month to month and March to march growth rates indicate that we will see over 60,000 units sold and that we could see 66,000 to 69,000 units sold. There is the possibility that we will hit 75,000 units sold.
The new normal for new home sales is a new monthly average sales price record for the current month. Price is a function of supply, demand, Square footage and amenities. Newer homes are usual bigger and normally have new amenities every year. Inventory has been seriously low for the past decade. Last month the average sales price was $376,700. last March the average sales price was over $384,000. The month to month and March to March data indicate that the average sales price could bump up against the $400,000 level, again. Expect a number between $389,900 and $399,900.
Could Inventory jump by 16% from last year's level? The number of units sold jumped between February 2017 and February 2018. A similar jump would get us to an inventory level of 305,000 units.
Expect Inventory to rise. Expect the number of units sold to improve The current year sold data is just 2000 units more than last year. The rolling year year data was up from 573,000 units February 2017 to 616,000 units February 2018. Up is up. We will get a better handle on the units expected to be sold this year once we move into May, June, and July. Expect the average sales price to rise. Eventually the average new home sales price will break through $400,000 and stay there, at least until January next year. Look for some good news.
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