New Home Sales February 2019 — Up 4.9 Percent Sequentially from January but Essentially Flat Vs a Year Ago

New single family residential (SFR) home sales of 667,000 on seasonally adjusted annualized rate (SAAR) in February far exceeded analyst expectations and were up 4.9 percent sequentially from January, but essentially unchanged from a year ago (up 0.6 percent).

There were an estimated 318,000 new homes available for sale at the end of February 2019 equating to 5.9 months inventory on a seasonally adjusted basis compared to 5.4 months one year ago.  On an unadjusted basis, February 2019 inventory of unsold new homes was 340,000 in the following state of construction:

 

20.6 percent not yet started
57.0 percent under construction
22.1 percent completed

New home sales are counted differently than existing home transactions.  An existing home sale is tallied when the property actually closes and ownership transfers from the seller to the buyer.   New home sales are counted at the time the purchase contract is signed.  In some 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.  In February 2019, new homes sold were as follows (unadjusted):

32.1 percent not yet started
30.4 percent under construction
37.5 percent completed

 

Median new-home price of $315,300 was down 3.6 percent compared to the same month a year ago as home builders have ramped up construction of entry-level properties.   The average new home price at $379,600 was up 1.6 percent versus a year ago.

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

The next graph shows new home and existing home median prices monthly commencing January 2001.

Since 2001, the median new home price has averaged 23.3 percent greater than the median existing home price.  The next graph shows the new home median price premium compared to existing home sales on a 12-month moving average basis.   The smallest new home price premium (12-month moving average) occurred in the get-rich-quick housing bubble in March 2006 at 7.0 percent.   The peak new home price premium of 39.0 percent was in April 2013, with the latest as of February 2019 at 23.6 percent – almost identical to the average monthly premium measured since 2001.

New home sales volatility is not systematic across the U.S.  The U.S. Census Bureau reports these data on a national and regional basis, delineated as follows:

The next table shows year-over-year changes for the U.S. and the four major geographic regions comparing February 2019 to February 2018.  As usual, I invoke the TINSTAANREM axiom — There Is No Such Thing As A National Real Estate Market or a National Economy.  The same is true regarding the number of new home sales on a regional basis.  Other factors such as job growth, rental rates and comparative price of existing home sales, along with availability come into play.   Only the South was up year-over-year by 6.8 percent.

The next table shows regional home sales as a percentage of national home sales, along with the change year-over-year.  Note that more than eight-out-of-every 10 new home sales are either in the South or the West (83.5 percent), with more than one-half in the South as of February 2019 (58.6 percent).

The following table shows the latest new home sales forecasts by Fannie Mae, Freddie Mac and the Mortgage Bankers Association for 2019 and 2020, with an expectation for gains of 1.0 percent and 4.5 percent, respectively.

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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