Jack Dunn - Reclaiming Common Sense

New Home Sales Jumped This March


New home sales and existing home sales are economic multipliers, as was discussed in yesterday's article" March Existing Homes: Record Average Sales Price." This is especially true with new construction sales. New construction means, often, new furniture for the house, new appliances, new yard equipment and garden supplies, and sometimes a new car for the new garage. Last week we received strong new new construction data with starts, units under construction, and completions at higher levels than this February and higher than March 2017. The March Real Estate Forecast article projected a level of units sold between 66,000 and 69,000 units (pre-recession we normally saw over 80,000 units sold, with a peak of 143,500 during March 2004.) This would be improvement from February 2018 and March 2017. It was also projected that we would see a new March Average Sales Price Record. It was projected that the average sales price would inventory continue to rise. stay below $400,000 ($395,000 to $399,000.) The other thought was that we could see inventory continue to rise. Last Month the inventory was up 1.35% month to month  and 16.22% March to March. If this happened this month then the growth from March 2017 (263,000) could reach 305,000. If the month to month growth is the same then the growth from February (301,000) could hit hit 305,000. Month to month growth could exceed 2.00% and exceed 307,000. What was recorded this month?


New Home Units Sold jumped to 68,000 Units. This is a level comparable to March 1996 and half of what was sold during March 2005. The housing recovery continues. This was within expectations, even though we did not quite break through the 70,000 mark. The Rolling year sales, what has happened during the past twelve months, is up from 573,000 during march 2017 and 616,000 during March 2018. The current year, first quarter data, is up from first quarter 2017. We saw 157,000 units sold 2017q1 and 172,000 units sold 2018q1. This is an increase of 9.5%. If that pace can continue then last year's year end 614,000 units could exceed 672,000 units. The "694,000" annualized sales number quoted in the report seem very high.


New Home Average Sales Price dropped from March 2017 level to $369,900. This is a slight drop from last month's $370,800. What is interesting to note here is that the median sales price, the price above and below and equal number of units were sold, increases from last March's $321,7000 and last month's $325,800 to $337,200. This miss is understandable. The average sales price may drop as lower priced homes are built to offset the lack of inventory for "lower priced" existing homes.


Inventory held constant, sort of. Last year the inventory level was reported at 301,000. This month the February inventory was revised down to 297,000. This month the advance March inventory is at 297,000.


New Home Sales should boost GDP. We should continue to see retail spending improve as the housing industry continues to recover from the Great recession. The Great Recession was a housing recession, a jobs recession, a retail sales recession, and a government spending recession rolled into one GDP recession. First quarter of last year there were $58.6 billion in sales. Last quarter, 2018Q4, there were $56.7 billion in sales. The new construction sales data is part of the Gross Private Domestic Investment component of the GDP. This past quarter there were $63.9 billion in new construction sales. This is a growth of 12.8% quarter to quarter and 9.0% same quarter to same quarter.


Watch the Revisions. There were a number of revisions to the non-seasonally job. The Seasonally adjusted Sales jumped 49,000 for February. More revisions will be made to the data from 2013 through 2017. Readers of this column know what happened with the CES Employment Statistics revisions with the release of the January Jobs Report. Seasonally Adjusted CES private sector worker growth between the December and January Jobs reports were spread across 2016, 2017, and January 2018.


New Construction May Be Boosting Retail Sales and GDP. We already know that the first quarter Retail Sales was a record first quarter. While quarter to quarter sales did drop 9.53%, non-seasonally adjusted, as a result of the annual post-Christmas drop in sales, the same quarter growth rate 2017Q1 to 2018Q1 was 4.82%. The quarterly sales increased from 1.328 Trillion 2017Q1 to 1.392 trillion 2018Q1. The fourth quarter Retail sales was 1.538 trillion this past year. This indicates that the "annualized" GDP, based on the current quarter, could drop from the 2.9% reported during Q4, and could improve for the "real" GDP, same quarter growth  of 2.6%.


The New Construction data and New Home Sales data were solid. Units sold are improving. The annual sales rate is up. The official projection may be a little strong. New home sales are just a fraction of the Gross Private Domestic Investment (GPDI) number used in the GDP.  Retail Sales and Government Spending are drivers of the GDP . Government Spending was up from 0.950 trillion during 2017Q4 to 1.102 trillion during 2018Q1 (15.95%) Spending was up 5.03% from the 2017Q1 value of 1.049 trillion dollars, or 5.03%. The only data that is missing is the Import Export data, which can be a drag on the GDP. Remember, the GDP is seasonally adjusted data.


It's the Economy.