by Bill McBride on 11/26/2014 12:24:00 PM
Wednesday, November 26, 2014
The new home sales report for October was below expectations at 458 thousand on a seasonally adjusted annual rate basis (SAAR).
Also, sales for the previous three months (July, August and September), were revised down.
Sales this year are significantly below expectations, however, based on the low level of sales, more lots coming available, and demographics, it seems likely sales will continue to increase over the next several years.
Earlier: New Home Sales at 458,000 Annual Rate in October
The Census Bureau reported that new home sales this year, through October, were 371,000, Not seasonally adjusted (NSA). That is up 1% from 367,000 during the same period of 2013 (NSA). Not much of a gain from last year. Right now it looks like sales will barely be up this year.
Sales were up 1.8% year-over-year in October.
Click on graph for larger image.
This graph shows new home sales for 2013 and 2014 by month (Seasonally Adjusted Annual Rate).
The year-over-year gain will be small in Q4, but I expect sales to be up for the quarter and for the year.
And here is another update to the "distressing gap" graph that I first started posting several years ago to show the emerging gap caused by distressed sales. Now I'm looking for the gap to close over the next few years.
The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through September 2014. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.
Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.
I expect existing home sales to mostly move sideways (distressed sales will continue to decline and be somewhat offset by more conventional / equity sales). And I expect this gap to slowly close, mostly from an increase in new home sales.
Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.