Reclaiming Common Sense

If We Get Good Real Estate News Will It Be Reported?

October Starts, Completion, and Sales - Best Since Oct. 2007

New home construction is important for the economy. New Home construction creates jobs and retail sales. New homes need new furniture, new appliances, and sometime new cars for the new garage. The article "October Real Estate Forecast: Expansion Should Continue" examined the new home construction data, the new home sales data, and the existing home sales data. The potential for new construction data to surprise to the upside was probable.

Starts were sluggish earlier this year - picking up the pace, now.  Expectations were for the month to month data to change by either plus or minus 4%. Same month growth is expected to grow by 3% to 8%. It was projected that starts would be recorded well above 75,000 starts and could anticipate 80,0000 single family starts.  This month the Under Construction data was expected to edge higher from last month's 1.178M units  and last year's 1.151M units  to between 1.179M and 1.192M units.  Completions were expected to continue their march upward from last year's levels. We saw 106,900 October completions during 2017 and 100,200 during 2016  A number of 104,000 units was well within the realm of possibility.

New Home Starts Spiked to 80,700 units. This is better than the October starts recorded, non-seasonally adjusted, than those recorded during October 2007 through October 2018. It was thought that we would smash through the 75,000 units "barrier" and possibly break through 80,000 units. Starts tend to peak during April, May, or June. The current month starts were down from 2018 levels during February, March, April, May, and June and better than 2018 levels during January, July, August, September, and October. The "New Home Starts Recession" is over based upon same month data. The Current year data is still lagging the 2018 data at 751,000 units compared to 765,000 units during 2018. That said, we are ahead of the year to date (YTD) starts for 2008 through 2017. The 2017 YTD starts data was at 725,000 units during October.

Units Under Construction Edged slightly lower than the September level - edged higher compared to the October 2018 Level.  There was some thought that the Under Construction (UC) data could edge lower as Completions overtake Starts. It was expected that the UC value would come between 1.118 M and 1.119M units. We dropped just under 1.118M at 1.1177M units.  We are near a record level of UC units. If we remain under 1.2 million units we will probably avoid overheating.

Completions Spiked to 112,000 units. This was not entirely unexpected. It was thought that the completions data could grow up to 5% month to month (102,000) or 4% October to October (104,200.) Digging into the data there was an outside chance that we would exceed the 2017 level of completions. Completions knocked the cover off the ball. The month by month data shows that we have beaten the 2018 levels seven out of ten months.

Completions Year To Date are up 3.6%. Last year we had just under 1 million completions as of October when we recorded 993,000 units. This year we have recorded 1.029 million completions. The last time we were at this level was October 2007 when we had 1.257 million completions YTD.

The Annualized Seasonally Adjusted data was remarkable, too. The main news outlet focus on the Annualized data. The Current data is Compared with the October 2018 data

  • Annualized Starts 1.314M (1.211M) (+8.51%)
  • Units Under Construction 1.161M (1.137M) (+2.11%)
  • Completions 1.256M (1.117M) (+12.44%)

This was all very good data, especially the completions. We need completions to build inventory. We need to build inventory to build sales.

Builder Confidence is High. The builder sentiment report was released yesterday, Monday November 18.   Sentiment is confidence. Last month the Sentiment was recorded at 71%. This month it was 70%. Some in the media (CNBC, Bloomberg, Marketwatch) will proclaim that confidence is waning. last November the sentiment was 60%. A 10% spike is impressive. It is also the highest November sentiment level since November 2004 when it was also recorded at 70%.

Thursday we will receive the Existing Home Sales data. We "normally" sell roughly 450,000 units during October. We also "normally" have 2 million units for sale during the course of most months of the year. Inventory started declining during 2015. Sales have attempted to keep pace with demand. Existing home sales, and especially new home sales, help spur Retail sales, especially Building Material and Garden Equipment (BMGE) sales and Furniture and Home Furnishing (FHF) sales. It is also clear that, as with the construction data, the sales data was held back earlier this year as a result of the Government Shutdown.

Next week Tuesday we will receive the October New Home Sales data. The sales data last October was weak by current standards with just 46,000 units sold. Spiking units sold this year have drawn down the inventory for sale. June and August popped more than the data would indicate. Sales have exceeded 2018 monthly levels eight of the nine months this year.   This year it is anticipated that we will see 50,000 to 54,000 units sold. Last year, and the prior October, the October average sales price has been roughly $394,900. Housing costs have been rising 3% a year for an extended period of time. It is expected that we will break through the $400,000 level this year and possibly approach the $409,000 level. Inventory tends to build during October. The inventory level is anticipated to be around 330,000 units.

Remember that all real estate is local. New home sales are dependent on community, school district, neighborhood, lot size, home size, upgrades, and other amenities. Existing home sales are based on more than location, location, location. Community, School district, neighborhood and amenities are also important to existing home sales. Condition and price are critical. Consult a local Realtor to find out what price ranges are hot, and which are not. If you have to sell your home to buy your next home then it is usually better to list your home first and "risk" two moves versus two mortgages. Consult your loan officer.

It's the Economy.