Existing home sales have been good, not great, due to a lack of inventory. Existing home sales have been improving almost every May since May 2009. The average sales price has been improving since May 2011. Last month the average sales price was $297,000. Last year the May average sales price was $294,000. We know that shelter costs have been increasing at a rate of at least 3%. This means that we should see an average sales price of at least $303,000. The overlap this month is between $311,000 and $312,000. Expect something over $300,000 and under $310,000.
Could units sold return to May 2003 or May 2004 levels? Units sold have been growing. We had 1.8 million units for sale during April. Inventory normally improves from April to May and May to June. The overlap for month to month and May to May sales growth places us between 570,000 and 577,000 units . Last May we had 555,000 units. Will inventory rise enough to allow sales to improve from last year's value.
The inventory trend is declining from year to year and up from month to month. We saw declining month to month and same month to same month from June 2017 through January 2018. The month to month growth has been up ever since that time. This is called the Spring Market. We set nearly 20 year low for inventory during January 2018. The trend has been downward since 2014. Will consumer confidence spur people to buy homes? Will a surge in New homes under construction spur existing home owners to buy a new home and free up the existing home inventory?
We need people to have a steady, full-time job, for at least two years, in most cases, to qualify for a mortgage. We are seeing record levels of full-time jobs right now. We also are leaving the "bankruptcy/foreclosure" window from the worst of the recession. Buyers can be tainted. Homes can be tainted. We may be entering into a Goldilocks period. Jobs are up. Retail sales are up. Housing sales are improving. The net-net is that we should see improvement in the existing homes marker.
New Home Construction should show strengthening. New home sales should show strengthening. Existing home sales should show strengthening. All of this should boost gross private domestic investment (GPDI) which should boost GDP.
It's the economy.
New Home Sales should set another record average sales price and Highest April units sold since April 2007. New home sales fell to a units sold level not seen since May of 1982 when it hit bottom during May 2010. We have seen May Sales improve since May 2011. We have seen the Average Sales Price soar. New Home sales should grow between 61,000, based on month to month gains, and up to 73,000 units, based on May to May growth. Inventory is up by roughly 10% from April 2017 to April 2018. More units for sale means that more units can be sold.
We have seen new home sales price soar since 2011. Last month the average sales price smashed through the $400,000 "barrier." The month to month growth rate is "guaranteeing" a $400,000 average sales price. We will see if there is a downward revision to the April 2018 average sales price. The May to May growth rate projects a possible record high average sales price of $420,000. There is an overlap between $392,000 and $407,000. Expect an average sales price over $400,000.
The Inventory levels could be up 10% from May 2018 and "flat" compared to last month. We need to stay at 293,000 units to be comparable to be where we were during May 2001. The over 300,000units level for new home inventory is probably as important as the under 300,000 seasonally adjusted first-time unemployment claims level. If we increase by 10% from the May 2017 level then we should come in at the 295,000 unit level. That would only be a gain of 1,000 units from last month. That is flat.
We cannot sell what is not for sale. We cannot sell new homes that are not completed. We cannot sell homes that are not under construction. We cannot sell new homes that are not started.If there is a lack of new homes, at least there are existing homes to sell. Right?
Real Estate is an Economic Multiplier
Real estate is a way to build wealth in the United States. People see equity gains, or losses, based upon what they pay for a home and how much of a down payment thy have. If you buy a $200,000 home with 20% down and sell it for $300,000 7 years later you have a 100,000 gain on $40,000 investment. You could walk away with $140,000 in equity. You also get a tax write-off for owning versus renting. Real estate sales is also an economic multiplier. People who buy homes often spend money at Home and Garden stores, Electronics and Appliance stores, and Furniture and Furnishings stores, three of the MARTS Retail Categories. New home construction, as starts, under construction, and completion data grows requires more construction workers. Professional and Business Service jobs can improve as more Realtors, loan officers, and appraisers are needed. More jobs. More sales. More permanent full-time jobs, more home buyers. More buyers, more sellers, more residential sales, more retail sales.
We have had a shortage of full-time jobs until 2017. There were fewer full-time jobs during January 2017 than July 2007. We saw struggling furniture sales, home and garden sales, and electronic and appliance sales. We had struggling new home sales and existing home sales, by units sold. What can we expect this month?
Starts could jump through the 80,000 unit level and into the 90,000 level. We are seeing Starts surge. We are still below the normal levels for May. We used to be between 100,000 units and 135,000 units started during the month of May. The Great Recession was a housing recession, jobs recession, and a retail recession. We have not recovered from the new home recession. We are still in recovery mode. Month to month growth pegs this month's number between 81,000 and 91,000 units. May to May growth pegs that number between 84,000 to 95,000. Expect a number between 84,000 and 91,000.
Under Construction has been surging - Could they Eclipse 1.12 Million Units? There can be no new home sales if we do not have units under construction. We are approaching record highs for new construction, month in and month out. Is there a shortage of "finishers" for paints, drywall, and landscaping? The month to month data points to a number between 1.08 and 1.12 million units. The annual growth points toward an even higher 1.12 Million to 1.45 million units. Expect a number under 1.12 million units.Completions may outstrip starts.
Completions Should smash through 100,000 units, again. Normally the completions data for May has been between 100,000 and 150,000 units.There were spikes during May 2006 and May 2007. Those were anomolous. The month to month data indicates 108,000 to 112,000 units completed. The May top May growth indicates that we could see 108,000 to 122,000 units completed. Expect 108,000 to 112,000 units sold.
We are looking at the best May new construction data since 2008, the best in a decade. We are catching up with 1994 data levels for starts and completions. We could have another decade of growth ahead of us, and at that we would be back to levels seen during 1994. You might not hear about this because most in the media are comparing seasonally adjusted data with seasonally adjusted data where the seasonal factors change month to month and year to year. The new construction sector is building momentum and economic vitality.
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