Thursday, April 23, 2020

A few Comments on March New Home Sales

by Calculated Risk on 4/23/2020 12:28:00 PM

New home sales for March were reported at 627,000 on a seasonally adjusted annual rate basis (SAAR). Sales for the previous three months were revised down.

New home sales are counted when contracts are signed, so the impact of COVID-19 was probably in the second half of March.   I expect sales will decline significantly in the April New Home sales report (to be released in May).

Earlier: New Home Sales Decrease to 627,000 Annual Rate in March.

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

This graph shows new home sales for 2019 and 2020 by month (Seasonally Adjusted Annual Rate).

New home sales were down 9.5% year-over-year (YoY) in March.   Year-to-date (YTD) sales are still up 6.7%, but sales will be down YTD soon.

The comparisons are easy over the first five months of the year, but sales will probably be down YoY for the next several months - at least - due to COVID-19.

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 2020. 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.

Now the gap is mostly closed.   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.

Over the next several months, both new and existing home sales will be negatively impacted by COVID-19.