New home sales at 635,000 on a seasonally adjusted annualized rate (SAAR) were down 12.8 percent in July 2019 compared to the revised estimate in June 2019 , but were up 4.3 percent compared to a year ago according to the U.S. Census Bureau. The median price fell 4.8 percent from a year ago to $312,800 as builders continue expanding the supply of entry-level offerings for first-time homebuyers.
The keywords here are “the revised estimate in June 2019.” The original estimate for June was 646,000 new home sales on a SAAR, but the restatement to 728,000 made it the greatest number of sales seen since August 2007. Thus, sales for June 2019 just one month ago were estimated to have been up 4.5 percent year-over-year. The revised estimate now is that June 2019 sales were up 18.0 percent year-over-year. For any statistic a restatement from an increase of 4.5 percent to 18.0 percent is highly material – and somewhat disturbing if the data are to be relied on for decision making purposes. This proves that it is challenging to accurately estimate new home sales in a timely fashion. The volatility of new home sales revisions have been addressed before in the Stewart Blog before, with the latest iteration at http://blog.stewart.com/stewart/2019/07/01/new-home-sales-may-2019-down-3-7-percent-vs-a-year-ago-or-maybe-not/
New home sales are counted when a purchase contract is signed while existing home sales are not counted until the property actually closes and ownership transfers. Many of the new home sales have yet to have a building permit issued or even commenced construction. Some of the new home contracts never close while others are never built.
The following table shows the latest revision of new home sales and median prices. Record new home sales were a revised 1,431,000 in March 2005 – more than double the current level.
Median prices for both new and existing home sales are shown in the following graph.
New home price premiums compared to existing home sales are shown in the next graph. Comparison is made using a 12-month moving average of medians to eliminate the price seasonality effect (where prices for existing homes peak each June and trough in January-February). New homes today sell for a 19.6 percent premium when compared to existing home sales.
While new home median prices continue at an almost 20 percent premium to existing home sales on a 12-month moving average, that premium without the smoothing effect of the 12-month moving average was just 8.8 percent in June 2019, the smallest difference seen since August 2008.