Thursday, April 23, 2015

Comments on New Home Sales

by Bill McBride on 4/23/2015 12:26:00 PM

The new home sales report for March was below expectations at 481 thousand on a seasonally adjusted annual rate basis (SAAR).

However, sales for December, January and February were revised up by a combined 35 thousand (SA).  So, including revisions, sales were about as expected.

Even with a little weakness in March, sales in 2015 are off to a solid start.

Earlier: New Home Sales decline to 481,000 Annual Rate in March

The Census Bureau reported that new home sales this year, through March, were 129,000, Not seasonally adjusted (NSA). That is up 22% from 106,000 during the same period of 2014 (NSA). This is very early - and the next several months are usually the strongest of the year NSA - but this is a solid start.

Sales were up 19.4% year-over-year in March, but that was an easy comparison.

New Home Sales 2013 2014Click on graph for larger image.

This graph shows new home sales for 2014 and 2015 by month (Seasonally Adjusted Annual Rate).

The year-over-year gain will probably be strong in Q2 too (the first half was especially weak in 2014), however I expect the year-over-year increases to slow later this year.

And here is another update to the "distressing gap" graph that I first started posting a number of 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.

Distressing GapThe "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through February 2015. 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 move sideways (distressed sales will continue to decline and be 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.