Reclaiming Common Sense

New Home Starts, Units Under Construction, and Completions were expected to rise compared to their 2018 Levels. Two out of three is Pretty Good.

The September New Home Construction data was published at the same time as the record setting weekly unemployment claims data. It was projected that we would see 77,000 to 84,000 single family starts, 1.170 million units under construction, or higher, and 98,900 to 114,000 completions, non-seasonally adjusted.  We had our best September starts and under construction data since September 2007. The media decided to report up as down.

New Home Starts came in at 80,700 single family units. This was more starts than were recorded during the month of September since, and including, September 2007. This was the best September starts data during the past 12 years.

The Month by Month Data indicates that Starts peaked during May 2018 - Peaked and maintained that level during July this year. The data early this year may have been impacted by slowing loan approvals due to the Government Shutdown. The new home starts data is impacted by the weather. Normally we see "Peak Starts" during April, May, or June. There was a considerable amount of media "hand wringing" that we were seeing weakness in the new home starts data the first few months of the year. We are still lagging behind 2018 for year to date Starts. The data is trending between 2017 and 2018 levels. We could catch the 2018 level by the end of the year.

Units Under Construction are at their highest level since July 2007. The July 2007 Units Under Construction level was 1,178,500 units. This September we have 1,178,100 units under construction. We need units to be under construction to feed into the completions data. The Completions data feeds into the New Home Sales data. You may see cornfields being built upon in your community. Units under construction produce, in general, more construction jobs, more Home and Garden Equipment Sales, and more activity for those in the Financial Services industry. The great Recession was first and foremost a Housing Recession that created a Jobs Recession. The Jobs Recession caused a Retail Recession. The three recessions were reported in the Gross Domestic Product Recession.

New Home Completions pulled back a little - still on track for best year since 2007. The number of units completed dropped back under 100,000 units for the first time since February. It appeared that 2018 was the "Year of the Start" while 2019 has been the "Year of the Completion." What is started needs to be completed. There were 893,000 completions year to date (YTD) during September of 2018. This year YTD we stand at 918,600. This is the most since September 2007 when we had 1.138 million units completed YTD. Completions pull back during September. There is the possibility for a "kick upward" during November and December as builders try to complete homes for end of the year, inventory clearing sales.

The overall data is very solid. You can observe in the "same month" histograms that the general trend is upward. The  new home starts, under construction, and completions data "crashed" between 2005 and 2011. It took roughly 14 years to grow from the lows of 1991 through to the highs of 2005. The housing recession dropped up to starts, under construction, and completions levels not experienced since the 1970s and prior. The month to month drops in Starts and Completions were anticipated. Month to month Completions were expected to drop by 5-10% They dropped 17.9%%. It was thought that completions could fall by 2% same month. They fell by 3.77%. The opposite is true for Starts. Starts were expected to drop by by up to 7% month to month and to grow 3% to 13% September to September. Starts only dropped 1.3% month to month and rose 7.60 September to September.

All of this data feeds into the New Home Sales Data. The new home sales data is anticipated to drop month to month and improve September to September. All but one month this year we have seen sales in excess of the 2018 New Home Sales Levels.  We saw spikes in sales during June and August that "threw off" the annualized rate of sales that are often referenced in the mainstream media.  The data indicates that the Units sold should exceed 50,000 units (47k-54k units on a MTM and September to September basis.) We sold 50,000 units during September 2017. We sold 46,000 units during September 2018 and 48,000 during September 2016. We sold in excess of 50,000 units during the month of September from 1992 through 2007. A value between 50,000 and 55,000 is very possible.

Most of the data indicates that he average sales price should set a September Record between $392,000 and $397,000. There is the possibility to smash through the $400,000 level and the $410,000 level. Shelter costs ave been increasing 3% or more all year long. This is expected to carryover to the New Home Sales Prices.

The Inventory Level should rebound. The January inventory was 349,000. August was 328,000. We struggled to get above 300,000 for years. The "healthy level" appears between 325,000 and 375,000 units. The data indicates that that it should grow to between 336,000 and 339,000 units with the possibility for 349,000 units. If the units sold exceed 50,000 units, as anticipated, then the inventory could fall.

Existing Home Sales will be released October 22nd. The existing home sales data is expected to decline month to month and possible improve September to September.  Existing home sales, units sold, tends to peak during June. June 30th is traditionally the busiest closing day of the year, or the Friday closest to June 30th. We saw July and August Existing Home Sales exceed June sales this year. Last September only 421,000 units were sold. The data is indicating that we may finally be seeing year over year gains in inventory, which should boost monthly sales for months to come.

People who didn't qualify for mortgages may qualify now. How many people have been held back from buying a home due to a bankruptcy or foreclosure between 2006 and 2012? How many people lost full-time jobs? (14 million.) Do people now have two years of job stability? Rising Wages? Rising Income? Improved Savings? 

Inventory has held back sales. Starts popped. Completions did not. The data indicates consumer confidence is overriding malaise for real estate sales. Next week should bring more good news (that may be ignored, again.)

It's the Economy.