Jack Dunn - Reclaiming Common Sense

Real estate is a market multiplier for sales and for jobs. New Construction work provides jobs and products for sale. New construction is very seasonal in the majority of the country. New construction work is needed during the "Spring Market" in order to have sales completed by June, July, August and prior to the end of the year.  Last week this column produced an article "March 2018 Real Estate Forecast: Momentum" projected that Starts, Units under Construction, and Completions would record non-seasonally adjusted data that would be up from their March 2017 levels and their February 2018 Levels.


The March Starts Popped above 70,000 units. We have not seen 70,000 starts during March since March of 2007 when we had over 100,000 starts. Normally we are above 80,000 units. The steady upward climb continues. can we get above 85,000 starts this June? Possibly. 


The Units Under Construction number popped above 1.1 million units. This was anticipated. The numbers have been trying to push a 1.2 million level for months. The 1.1 million level is up by almost 10% from last year. This past September, October, and November we were above 1.1 million units. Can we break through 1.2 million units this Fall? Probably.


The Completions data was up, as well. The completions data was up from the  March 2017 level and the February 2018 level. The trend here is to have completions pick up pace through July. Will the March to April data drop, as it did last year, or will it keep moving higher as the number of units under construction continues to move higher?


Finally back to normal? The situation where under starts data, under construction data, and completions data continue to rise month to month, and especially year to year, bodes well for a solid new construction sales report next week. There is still a considerable amount of new single family starts to return to pre-housing recession levels. We may want to see a starts value between 80,000 and 100,000 units during March next year to return to normalcy. Did we see too many starts during the pre-recession era? It appears that way. The under construction data was strong. We have rarely seen under construction data this high. The completions data appears to be already re-entering a period of normalcy. This may draw down the under construction data over time.


New home starts should also pop next month. The average sales price should set a new March record. The rolling year data is ahead of where we were last year for Starts and Completions. The Current year data is ahead of where we were last March for Starts and Completions. These two measures suggest that the new home market is expanding and that these numbers should continue to improve for the near future. If we see the current year data drop below the data from 2017 at any point this year, that does not mean that the new home market is weakening. One point does not make a trend. We now have three months of data for this year, and three points does form the basis of a trend. We should continue to see these trends continue as people work more jobs, and as we see construction jobs improve year over year for the same month. This report was a solid new construction report. It was a "Goldilocks" report - Not too hot, just right.


It's the economy.