Tuesday, May 26, 2015

Comments on New Home Sales

by Bill McBride on 5/26/2015 11:32:00 AM

The new home sales report for April was above expectations at 517 thousand on a seasonally adjusted annual rate basis (SAAR).

Earlier: New Home Sales increased to 517,000 Annual Rate in April

The Census Bureau reported that new home sales this year, through April, were 179,000, Not seasonally adjusted (NSA). That is up 23.7% from 145,000 during the same period of 2014 (NSA). That is a solid first four months!

Sales were up 26.1% year-over-year in April, 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 through July (the first seven months were 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.