Monday, January 27, 2020

A few Comments on December New Home Sales

by Calculated Risk on 1/27/2020 11:26:00 AM

New home sales for December were reported at 694,000 on a seasonally adjusted annual rate basis (SAAR). Sales for the previous three months were revised down.

Annual sales in 2019 were at 681,000, up 10.3% from annual sales in 2018, and the best year for new home sales since 2007.   This was well above analysts forecast for sales in 2019, and the growth mostly happened in the second half of the year.

Earlier: New Home Sales at 694,000 Annual Rate in December.

New Home Sales 2018 2019Click on graph for larger image.

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

The year-over-year comparison was easy in December, and sales in December were up 23.0% year-over-year compared to December 2018.

Note that the comparisons will be fairly easy for the first five months of 2020, but will be more difficult in the second half of the 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.

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

Even though distressed sales are down significantly, following the bust, new home builders focused on more expensive homes - so the gap closed slowly.

Now the gap is mostly closed, and I expect it to close a little more.   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.