Wednesday, January 27, 2016

Comments on December New Home Sales

by Bill McBride on 1/27/2016 11:59:00 AM

The new home sales report for December was above expectations, and sales for September, October and November were revised up. Sales were up 9.9% year-over-year in December (SA).

Earlier: New Home Sales increased to 544,000 Annual Rate in December.

The Census Bureau reported that new home sales in 2015 were 501,000. That is up 14.5% from 437,000 sales in 2014. That is a strong year-over-year gain for 2015.

Here is a table showing new home sales and the year-over-year changes since 2005:

New Home Sales (000s)
  New Home
Sales
Year-over-Year
Change
20051,2836.7%
20061,051-18.1%
2007776-26.2%
2008485-37.5%
2009375-22.7%
2010323-13.9%
2011306-5.3%
201236820.3%
201342916.6%
20144371.9%
201550114.5%

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 gains were stronger earlier in 2015.

The comparisons in early 2016 will be more difficult.  And I expect lower growth this year.

Overall 2015 was a solid year for new home sales.

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 December 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 more sideways, and I expect this gap to slowly close, mostly from an increase in new home sales.

However, this assumes that the builders will offer some smaller, less expensive homes.

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.