Tuesday, April 23, 2019

A few Comments on March New Home Sales

by Calculated Risk on 4/23/2019 11:35:00 AM

New home sales for March were reported at 692,000 on a seasonally adjusted annual rate basis (SAAR). This is the second highest sales rate for this cycle (just behind November 2017). This was well above the consensus forecast, however sales for the previous three months were revised down.

With these revisions, sales increased slightly, just 0.7%, in 2018 compared to 2017.   And my guess is we haven't seen the peak of this cycle yet.

Earlier: New Home Sales increased to 667,000 Annual Rate in February.

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 March were up 3.0% year-over-year compared to March 2018.

Year-to-date (just through March), sales are up 1.7% compared to the same period in 2018.  The comparison will be most difficult in Q1, so this is a solid start for 2019.

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.

Distressing GapThe "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through March 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 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.

Distressing GapAnother way to look at this is a ratio of existing to new home sales.

This ratio was fairly stable from 1994 through 2006, and then the flood of distressed sales kept the number of existing home sales elevated and depressed new home sales. (Note: This ratio was fairly stable back to the early '70s, but I only have annual data for the earlier years).

In general the ratio has been trending down since the housing bust, and this ratio will probably continue to trend down over the next few years.

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.