New Home Sales January 2021

New home sales rose an estimated 19.3 percent on a seasonally adjusted annualized rate (SAAR) in January 2021 compared to one-year ago, and were up 4.3 percent sequentially from December 2020 according to the United States Census Bureau.  Total sales in January 2021 on a SAAR were an estimated 923,000.  Median new home price in January 2021 was $346,600 versus $328,900 in January 2020.  The change in price is actually greater due to a large increase in lower-priced, entry-level, new home construction in 2021.  Softwood lumber prices for new home construction framing have risen 112 percent in the past year according to CNBC and Random Lengths.   Lumber price increases have driven up construction costs more than $24,000 per new home since April 2020 according to the National Association of Homebuilders (NAHB).

The graph shows total new home sales and median prices monthly since January 2007.  The number of sales are expressed on a seasonally adjusted annualized rate.

On a monthly non-seasonally adjusted basis, new home sales rose from 59,000 in January 2020 to 70,000 in same month in 2021 – an 18.6 percent gain.   Inventory declined 6.4 percent, going from 327,000 homes for sale (not-seasonally adjusted) in January 2020 to 306,000 as of January 2021.

New home sales metrics are calculated in a different manner than existing home sales.   Existing home sales are actual closings in which the ownership of the property transfers from the seller to the buyer.  New home sales are counted when a purchase contract is signed and a deposit paid.   Some new home sales counted have yet to even have obtained a building permit.  As a result, new home sales data are subject to potential high-levels of restatement over time.  See two prior blogs detailing the extent to which new home sales data are restated:

http://blog.stewart.com/stewart/2019/08/26/new-home-sales-july-2019-if-you-do-not-like-the-number-just-wait/

http://blog.stewart.com/stewart/2019/07/01/new-home-sales-may-2019-down-3-7-percent-vs-a-year-ago-or-maybe-not/

Among January 2021 new home sales:

31.4 percent had not yet started construction when the purchase contract was signed
40.0 percent were under construction when the purchase contract was signed
27.1 percent were already completely constructed when the purchase contract was signed

 

Since 2002, there was an average 8.9 existing home sales per new home transaction.   The smallest difference was 4.7 existing homes sold for every new home in May 2004, and the most was 16.3 existing home sales for every new home contracted in May 2010.

To read the latest U.S. Census Bureau new home sales statistics click https://www.census.gov/construction/nrs/pdf/newressales.pdf

The current 2021 forecast for new homes sales ranges from 860,000 (Fannie Mae +6.0%) to 949,000 (MBA  +16.7%).   Looking back at history, these two are close to agreeing on the number of new home sales in 2020, with Fannie estimating 811,000 and the MBA at 813,000.

Based on prior experience, however, all of the numbers for January 2021 change in 30 days.

Ted

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