Tuesday, August 25, 2015

Comments on July New Home Sales

by Bill McBride on 8/25/2015 12:27:00 PM

The new home sales report for July was slightly below expectations and there were also minor downward revisions to prior months.  However sales are still up solidly for 2015 compared to 2014.

Earlier: New Home Sales increased to 507,000 Annual Rate in July.

The Census Bureau reported that new home sales this year, through July, were 316,000, not seasonally adjusted (NSA). That is up 21.2% from 260,000 sales during the same period of 2014 (NSA). That is a strong year-over-year gain for the first seven months of 2015!

Sales were up 25.8% year-over-year in July.

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 was strong through July (the first seven months were especially weak in 2014), however I expect the year-over-year increases to slow over the remaining months - but the overall year-over-year gain should be solid in 2015.

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 several years.

Distressing GapThe "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through July 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 mostly move sideways over the next few years (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.