New Home Sales in February 2018 Flat Versus a Year Ago

New homes sales of 618,000 on seasonally adjusted annualized rate (SAAR) were essentially unchanged from both a year ago and the prior month.    There were 305,000 new homes available for sale at the end of February 2018 equating to an estimated 5.9 months inventory.  In comparison, existing homes had a miniscule 3.4 month inventory at the same time.

New home sales are counted differently than existing home transactions.  An existing home sale is counted when the property actually closes and ownership transfers.   New home sales are counted at the time the contract is signed.  In some extreme circumstances for a counted new home sale, construction may not have yet commenced and that specific transaction may not close.  As a result, new home sales often have material revisions from one month to the next.

Median new-home price was $326,800, up 9.7 percent versus the same month a year ago.   The average new home price at $376,700 was up 1.7 percent versus a year ago.

The following graph shows new home sales on a SAAR and monthly median price since January 2007.

The growth of the median price since 2014 is a function of both rising values and also the dearth of lower-amenity, smaller entry-level new housing construction.

As a result, the ratio between new and existing home median prices continues to diverge at an increasing rate.  From 2001 through 2006, the average new home median price was 10.9 percent greater than corresponding existing home price.   Since 2014, new home median prices have averaged 32.0 percent greater than existing homes.  New home median prices in the last six-months were an average 31.8 percent greater than existing home transactions.

New and existing home median prices are shown in the following graph commencing in 2001, prior to the start of the housing bubble.

Fannie Mae’s March 2018 forecast expects a 9.7 percent increase in new single family home sales from 2017 to 2018 and a 5.5 percent gain from 2018 to 2019.  The Mortgage Bankers Association March 2018 forecast shows new home sales rising 2.9 percent in 2018 year-over-year and 3.9 percent in 2019

To read the entire Census Bureau news release on new home sales click https://www.census.gov/construction/nrs/pdf/newressales.pdf

Ted

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