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Wednesday, December 23, 2020

A few Comments on November New Home Sales

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

New home sales for November were reported at 841,000 on a seasonally adjusted annual rate basis (SAAR). Sales for the previous three months were revised down sharply.

This was well below consensus expectations of 990,000, but sales were still up 20.8% from November 2019.   The last five months were the highest sales rates since 2006.

Clearly low mortgages rates, low existing home supply, and low sales in March and April (due to the pandemic) have led to a strong increase in sales.  Favorable demographics (something I wrote about many times over the last decade) and a surging stock market have probably helped new home sales too.

Another factor in the strong headline sales rate over the last several months was the delay in the selling season.   Usually the strongest sales are in the March to June time frame, but this year the strongest sales months were later in the year - so the usually seasonal factors boosted sales in late Summer and Fall.

Earlier: New Home Sales decrease to 841,000 Annual Rate in November.

New Home Sales 2019 2020Click 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 up 20.8% year-over-year (YoY) in November.   Year-to-date (YTD) sales are up 19.1% (This is even above my optimistic forecast for 2020!).

And on inventory: since new home sales are reported when the contract is signed - even if the home hasn't been started - new home sales are not limited by inventory (except if no lots are available).  Inventory for new home sales is important in that it means there will be more housing starts if inventory is low (like right now) - and fewer starts if inventory is too high (not now).