New Home Sales fall further in March

The U.S. Census Bureau and the Department of Housing and Urban Development released the New Homes figures. New Single Family Houses were at a seasonally adjusted annual rate of 526,000. This is 8.52% below the revised February 2008 rate of 575,000 and 36.63% below the March 2007 rate of 830,000. Economists had forecast that sales would come in at 580,000.

This previous post has a chart going back to 1960.

The 3 month average of the median new homes sales price of $234,900 is down 8.22% from where it was a year ago at $255,933 (in February the average was down 6.01%). Monthly sales prices can be very volatile. January 2008 was at $232,900, February 2008 was at $244,200, and March 2008 was at $227,600. The S&P Case-Shiller Home Price index also uses a 3 month average to calculate the monthly index. There are officially 460,000 new homes for sale. This number is underestimated because the U.S. Census Bureau does not account for cancellations. At the current sales rate there is 11.0 months supply of inventory. If there was not another house built this year, it would take that approximately that long to sell the current inventory.

More new homes are currently being completed than are being sold, so this number is going to continue higher. Last year, 905,000 new homes were completed for sale. From November 2006 to October 2007, only 829,000 new homes were sold (new homes are calculated when a home goes into contract—the sale is usually completed a few months later). The U.S. Census Bureau has not yet released the figures for the new homes completed for sale for the first quarter yet. However they do release the figures monthly for the new homes completed for any purpose (for sale, for owner use, and for rental use). Homes built for sale has recently averaged about 75% of the total homes built. Using 75%, the number of new homes completed for sale for the first quarter will total approximately 152,825. Only about 146,000 new homes will have sold during that period (based on contracts from November 2007 to January 2008). The growth of excess inventory is slowing. However, the first quarter is also the slowest quarter for completions for the year due to weather and selling patterns.

New Home sales usually spike up at this time. March through June are the strongest months of the year for new home sales. November through January are the slowest for the year. Instead of picking up in pace, sales have slowed down further. Using 2001 and 2005 for comparisons, sales for March are at 54.3% of 2001’s pace and only 40.2% of the pace during the boom year of 2005. This is the slowest it has been during this housing slump.

Sphere: Related Content

Housing Starts are at the lowest level in 17 years

The U.S. Census Bureau and the Department of Housing and Urban Development announced the new residential construction statistics for December 2007.

Housing starts were at their lowest level since 1991. Besides 1991, you have to go back to the 1982 recession before starts were lower than the December 2008 numbers.

Building permits in December were down 8.1% from November and were down 34.4% from December 2006. Housing starts were down 14.2% from November and were down 38.2% from December 2006. Housing completions in December were down 7.7% from November and were down 31.0% from December 2006.

These are seasonally adjusted numbers that account for typically slow numbers in December. The actual numbers were down further.

Here is a chart of permits, starts, completions and sales. You can click on it for a larger view.


New Housing permits, starts, completions and sales, typically follow each other closely. Once builders obtain their permits, they start building soon. There is usually about a 6 month lag in completions. Calculated Risk puts out great charts on the lag factor.

One thing that stands out on the New Housing chart is the amount of New Housing Sales and New Homes for Sale. There has never been this many new homes for sale. Looking at the past peaks of construction, the amount of homes for sale did not rise as much as they did this time. More homes were being built for use or rentals and where not being built to sell to consumers to the degree that they were in this housing cycle. Also the new homes for sale is being understated. The Census Bureau does not account for cancellations. If a new home falls out of contract, the Census Bureau still counts that house as a sale and does not raise the new home inventory.

Based on the cancellation rates reported by some of the major builders, Calculated Risk has estimated that New Homes Sales are overestimated by 100,000 and new home inventory is underestimated by same amount.

Here is a chart comparing new housing starts and the GDP.

New housing and GDP have correlated very closely up until this recent housing boom. The divergence in 1968 was accompanied by the Vietnam War (this post on GDP and some of its components had a graph of Defence Spending).

The economy would not have grown as much without the housing boom and the mortgage equity withdrawals that came with it. As discussed earlier in the GDP post, housing is the most important component in the business cycle. The 4th quarter 2007 GDP figures are due to be released on January 30, 2008, but we already know that housing will be a drag on GDP.

Sphere: Related Content

New Home Sales continue their fall last month

The U.S. Census Bureau and the Department of Housing and Urban Development released the New Home Sales figures for February 2008 today.

Sales of new one-family houses in February 2008 were at a seasonally adjusted annual rate of 590,000 which is 1.8% below the January 2008 rate of 601,000 and is 29.8% below the February 2007 rate of 840,000.

There is currently 9.8 months supply of new homes. Months Supply is the number of months it would take to sell all the homes at the current sales pace if no new homes were added. Above 6 months supply puts pressure on home prices. The median home price rose to $244,100 from $225,600 posted last month, but is below February 2007’s median price of $250,800. Median home prices for new homes are very volatile as the chart on the right shows.

As mentioned in this post, although the situation is slowly improving, more new homes are still being built than are being sold.

The sales pace is also deteriorating at a faster pace. Since May 2007, Sales for the month compared to 2005 (highest rate in the last 7 years) and 2001 (lowest rate in last 7 years) has deteriorated every single month excepting October 2007 when it fell at a slightly slower rate than the previous month. March is typically the busiest month of the year for New Home Sales. It will be interesting to see how New Home Sales perform this month.

Sphere: Related Content

New Home Starts and Completions Fall, But not Far Enough

The New Residential Construction figures for February 2008 were released yesterday by the U.S. Census Bureau and the Department of H.U.D.

Single-family housing starts were at a seasonally adjusted annual rate of 707,000 and were down 6.7% from January 2008 and were down 40.5% from February 2007. Single-family housing completions were at a seasonally adjusted annual rate of 903,000 and were down 4.6% from January 2008 and were down 30.6% from February 2007. Here is a chart showing the different components of housing.

This previous post discussed the pressures on home prices that excess inventory exerts.
From the number of houses for sale, it appears that inventories are shrinking. However sales are falling faster, so inventory is still increasing. This next chart compares the amount of houses completed for sale every quarter to the number of new home sales for the previous quarter. New homes are counted when a home goes into contract. Builders try to have contracts lined up before they complete the house. Up through the end of 2005, homes were being sold as fast as the builders could build them. Starting the first quarter of 2006, there were more homes being completed than sold. Since then there have been 244,000 more homes built than have been sold.

In 2007, 74% of the homes completed were intended for sale. The rest were built by owner or for rental use. At a 74% rate, January’s completions equate to 737,780 homes for sale, and February equates to 668,220 homes for sale. Seasonally adjusted sales in January 2008 were at a pace of 588,000 a year. There are still more homes being completed than are being bought.

In 2007, 73% of the homes started were intended for sale. At a 73% rate, January’s starts equate to 553,340 homes for sale, and February equates to 516,110 homes for sale. This is slightly lower than the current sales pace of 588,000 a year. At the current pace of starts and sales, the amount of excess homes will be sold off in the middle of 2011. New home starts look like they will continue to weaken.

Sphere: Related Content

New home construction for April is down over 30% from last year

The U.S. Census Bureau and the HUD Department announced the new homes construction stats for April 2008 today. Building permits were at a seasonally adjusted annual rate of 978,000 (1 units were at 646,000) which was 4.9% over the previous month, but 34.3% below April 2007. Housing starts were at a seasonally adjusted annual rate of 1,032,000 (1 units were at 692,000) which was 8.2% over the previous month, but 30.6% below April 2007. However, single-family starts were down 1.7% from the previous month. Housing completions were at a seasonally adjusted annual rate of 1,000,000 (1 units were at 792,000) which was 16.0% below the previous month, and 34.9% below April 2007.

Rather than focus on the if construction is up or down, the focus should be on if there is a healthy amount of new construction. Before this current housing slowdown, about 98.1% of permits turned into starts (from 1997-2006), and 94.6% of permits were completed. Currently about 73% of new home construction is built for sale. The other homes are being built to be rented out or for owner use. In March 2008, 1 unit homes were selling at an annual pace of 526,000. Assuming typical completion and built for sale percentages, the permits issued will result in 80,000 less homes built than are currently being sold a year. The number of starts would result in 39,000 less homes built than are being sold. The number of completions are 52,000 more than are being sold a year. There is currently 11.0 months supply of new homes. Over 6 months supply indicates oversupply. As mentioned in this post, there are currently about 2 million excess homes in America. New home construction is now inline with sales, however this is not helping to reduce the oversupply of homes.

Sphere: Related Content

New Home Sales Continue at Weak Pace

The U.S. Census Bureau and the Department of HUD announced today that the new single family home sales for May 2008 were at a seasonally adjusted annual rate of 512,000. This was 2.48% less than April 2008 and 40.26% less than May 2007. Economists had correctly forecasted that sales would fall to 512,000.

There was 10.9 Months Supply for May up from 10.7 in April. Months Supply is the amount of time it would take to completely sell the new homes inventory if no new homes were built and if the sales pace continued as is. Supply and Demand is balanced at 6 months. The current level will continue to put pressure on home prices both for new homes and existing homes.

New home sales continued to be weak during what is usually the peak new homes selling season. Using 2001 and 2005 for comparison, sales for May are at just 40.0% of the level reached in May 2005 at the peak of the real estate cycle and are at 60.0% of the level in May 2001.

Sphere: Related Content

New Home Sales continue to weaken

The U.S. Census Bureau and the Department of HUD announced today that the new single family home sales for August 2008 were at a seasonally adjusted annual rate of 460,000. This was 11.5% less than July 2008 and 34.5% less than August 2007. Economists were expecting that sales would fall to 510,000.

Months Supply reached 10.9 in August, up from 10.3 in July. Months Supply is the amount of time it would take to completely sell the new homes inventory if no new homes were built and if the sales pace continued as is. Supply and Demand is balanced at 6 months. The current level will continue to put pressure on home prices both for new homes and existing homes.

New home sales are still weakening and now we are entering the slow months for new home sales.  The $700 billion bailout isn't helping the psychology of buyers either.

Sphere: Related Content

New home sales in September are up slightly from previous month; decline in prices is picking up steam

The U.S. Census Bureau and the Department of HUD announced today that the new single family home sales for September 2008 were at a seasonally adjusted annual rate of 464,000. This was 2.7% higher than August 2008 and 33.1% less than September 2007. Economists were expecting that sales would fall to 450,000.  The median sales price fell to $218,400 in September down 0.9% from August 2008 and down 9.1% from September 2007.  This is the steepest rate of decline since median prices peaked in March 2007.

Months Supply fell to 10.4 in September, from 11.4 in August. Months Supply is the amount of time it would take to completely sell the new homes inventory if no new homes were built and if the sales pace continued as is. Supply and Demand is balanced at 6 months. The current level will continue to put pressure on home prices both for new homes and existing homes.

The financial crisis really picked up steam in October.  New home sales typically rise in October from September.  It will be interesting to see what happens to new home sales  for October.

Sphere: Related Content

New home construction at record low pace

The U.S. Census Bureau and the HUD Department announced the new homes construction stats for December 2008 today. Total building permits were at a seasonally adjusted annual rate of 549,000 which was 10.7% below November 2008 and was down 50.6% from a year ago. 1 unit permits were at a seasonally adjusted annual rate of 363,000 which was down 12.3% from the previous month and down 49.2% from a year ago. This is the lowest rate on record going back to 1960.  If adjusted for population growth, today's figures would be much lower. Total housing starts were at a seasonally adjusted annual rate of 550,000 which was down 15.5% from the previous month, and down 45.0% below December 2007. Economists had forecast starts to be at a 605,000 annual pace.  1 unit starts were at 398,000 which is down 13.5.0% from November 2008 and down 48.9% from a year ago. Housing completions were at a seasonally adjusted annual rate of 1,015,000 (1 units were at 668,000) which was 5.2% above the previous month, and 23.6% below December 2007.

There is an oversupply of housing so these large drops in construction are actually a good thing.  Even though construction of new homes has dropped quickly, sales have dropped just as fast.  Soon months supply will start to inch down, but we are still far away from supply and demand being balanced. New homes are also adversely affected by the large surplus of existing homes.

Sphere: Related Content

New home starts down sharply; supply is still rising

The U.S. Census Bureau and the HUD Department announced the new homes construction stats for September 2008 today. Total building permits were at a seasonally adjusted annual rate of 786,000 which was 8.3% below August 2008 and was down 38.4% from a year ago. 1 unit permits were at a seasonally adjusted annual rate of 532,000 which was down 3.8% from the previous month and down 38.9% from a year ago. 1 unit permits are at their lowest annual rate since August 1982. Total housing starts were at a seasonally adjusted annual rate of 817,000 which was down 6.3% from the previous month, and down 31.1% below September 2007. 1 unit starts were at 544,000 which is down 12.0% from August 2008 and down 41.9% from a year ago. Housing completions were at a seasonally adjusted annual rate of 1,097,000 (1 units were at 806,000) which was 11.7% above the previous month, and 20.4% below September 2007.

Permits and starts of new homes are starting to be less than demand. Completions are still higher than the current level of sales.  Soon months supply will start to inch down, but we are still far away from supply and demand being balanced.  New homes are also adversely affected by the large surplus of existing homes. 

Sphere: Related Content

New Homes Sales Prices Plummet in January

The U.S. Census Bureau and the Department of Housing and Urban Development announced the new residential one family sales statistics for January 2008 today.

Sales were at a seasonally adjusted annual rate of 588,000, down 2.8% below the revised December rate of 605,000 and were 33.9% below the January 2007 estimate of 890,000. The median sales price of new houses sold in January 2008 was $216,000 which was down 15.1% from January 2007. This is the largest annual decline (going back as far as 1963). The seasonally adjusted estimate of new houses for sale at the end of January was 482,000 which is a 9.9 months supply at the current sales rate.

New home prices are sticky on the way down. Builders try hard not to lower prices. Instead of lowering prices, they often will sweeten the deal with "free" upgrades, or will pay for closing costs. The sales price is what is recorded. The concessions are not noted. This works for a while, but that can only go so far in a truly declining market. Soon, buyers will demand all the "free" stuff and want price concessions as well. Also complicating things is the understated inventory and overstated sales numbers as discussed in this previous post. Here is an update on the components of New Homes

Following is a chart showing the median new home sales price and the effects of inventory. This goes back to the classic economics of supply and demand. 6 months supply is commonly talked about as being the breakpoint between a buyers market and a sellers market. When the market is flooded with inventory, then buyers can be picky, sellers may have to lower their prices to sell a property. When there is low inventory, buyers will sometimes have to overbid to win homes with terms suiting the sellers.



It is amazing how the boom from 1996 to 2005 followed this rule like clockwork. Months supply went lower than 6 months in July of 1996 and went over 6 months supply in January of 2006.

Sphere: Related Content

New Home Permits at lowest level since 1982

The U.S. Census Bureau and the HUD Department announced the new homes construction stats for July 2008 today. Total building permits were at a seasonally adjusted annual rate of 937,000 which was 17.7% below June 2008 and was down 32.4% from a year ago.  Most of the dropoff from the previous month was due to the new construction code in New York City that went into effect on July 1.  1 unit permits were at a seasonally adjusted annual rate of 584,000 which was down 5.2% from last month and down 41.4% from a year ago. 1 unit permits are at their lowest annual rate since August 1982.

Total housing starts were at a seasonally adjusted annual rate of 965,000 which was down 11.0% from the previous month, and down 29.6% below July 2007.  1 unit starts were at 641,000 which is down 2.9% from June 2008 and down 39.2% from a year ago. Housing completions were at a seasonally adjusted annual rate of 1,035,000 (1 units were at 791,000) which was 8.7% below the previous month, and 31.7% below June 2007.  The amount of new homes being built is starting to equal demand.  However, there still remains a large amount of inventory.

Sphere: Related Content

New housing construction continues to slow; inventory is getting smaller

The U.S. Census Bureau and the HUD Department announced the new homes construction stats for August 2008 today. Total building permits were at a seasonally adjusted annual rate of 854,000 which was 8.9% below June 2008 and was down 36.4% from a year ago. 1 unit permits were at a seasonally adjusted annual rate of 554,000 which was down 8.9% from the previous month and down 36.4% from a year ago. 1 unit permits are at their lowest annual rate since August 1982. Total housing starts were at a seasonally adjusted annual rate of 895,000 which was down 6.2% from the previous month, and down 33.1% below August 2007. 1 unit starts were at 630,000 which is down 1.9% from July 2008 and down 34.9% from a year ago. Housing completions were at a seasonally adjusted annual rate of 961,000 (1 units were at 676,000) which was 9.8% below the previous month, and 35.8% below June 2007.

The amount of new homes being built is starting to be less than demand. This is a good thing as inventory is starting to be reduced. However, there is still a long way to go for demand to be in balance with supply.

Sphere: Related Content

New Home Sales Rise in February

New home sales data showed signs of settling down.  Permits rose 3% in February compared to January 2009.  Year over year permits were down 44%.  Starts in February were up 22% compared to the previous month and were down 47% year over year.  Completions in February were up 2% compared to January and were down 37% compared to a year ago. 

The bad news is this is increasing the supply of new homes.  There are already 13.3 months supply of homes.  Months supply has risen every month for the last 4 months now.  There will continue to be downward pressure on new home prices.

Sphere: Related Content

New Home Sales Continue their Slow Pace in April

The U.S. Census Bureau and the Department of HUD released the new homes data today. New one-family home sales were at a seasonally adjusted annual rate of 526,000 for April 2008. This is up 3.3% from the revised March rate of 509,000, but is 42.0% below April 2007. March 2008 was revised from 526,000 to 509,000. Economists had forecast a level of 520,000 for April 2008.

Months Supply improved from 11.1 in March to 10.6 in April. However this is still at an elevated level for inventory. Over 6 months supply puts a downward pressure to home prices as supply exceeds demand. As discussed in this post, the amount of new home completions is now around the level of new home sales. However, there is still a huge amount of excess inventory to work through.

March through June is usually the strongest months for New Home Sales. Using 2001 and 2005 for comparisons, sales for April are at 56.0% of 2001’s pace and only 40.5% of the pace during the boom year of 2005. Sales continue to be anemic.

Sphere: Related Content