Thursday, March 14, 2019

A few Comments on January New Home Sales

by Calculated Risk on 3/14/2019 03:34:00 PM

First, this report was for January; the February report will be released on March 29th.

New home sales for January were reported at 607,000 on a seasonally adjusted annual rate basis (SAAR). This was below the consensus forecast, however the three previous months were revised up.

With these revisions, sales increased 2.3% in 2018 compared to 2017.   I expect sales to be around the same level in 2019 as in 2018 (not fall off a cliff), and my guess is we haven't seen the peak of this cycle yet.

On Inventory: Months of inventory is now above the top of the normal range, however the number of units completed and under construction is still somewhat low.   Inventory will be something to watch very closely.

Earlier: New Home Sales decreased to 607,000 Annual Rate in January.

New Home Sales 2017 2018Click on graph for larger image.

This graph shows new home sales for 2018 and 2019 by month (Seasonally Adjusted Annual Rate).

Sales in January were down 2.4% year-over-year compared to January 2018.

The comparison will be most difficult in Q1.

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 January 2019. This graph starts in 1994, but the relationship had been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.   The gap has persisted even though distressed sales are down significantly, since new home builders have focused on more expensive homes.

I still expect this gap to slowly close.   However, this assumes that the builders will offer some smaller, less expensive homes. If not, then the gap will persist.

However, this assumes that the builders will offer some smaller, less expensive homes. If not, then the gap will persist.

xisting 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.