New home sales fell in March for the third consecutive month. Sales in the first quarter are up just 1.3% from the same quarter in 2015.
New home prices declined 3.2% in March from February, and 1.8% from March 2015.
The Bloomberg Econoday consensus estimate was for 522,000 new home sales at a seasonally adjusted annualized rate (SAAR). The Commerce Department report pegs actual sales at 511,000 SAAR.
Highlights
Growth in new homes isn’t spectacular but, given how soft general economic conditions are, the sector is posting moderate and still respectable numbers. March sales came in at a 511,000 annualized rate which is on the low side of expectations but the report includes a 7,000 upward revision to 519,000 for February which now stands as among the very best months since 2008. Year-on-year, sales are up 5.4 percent, right in line with permits which are up 4.6 percent.
Lack of new homes on the market, which has been holding down sales, improved a bit in April, to 246,000 units for a 2.1 percent monthly gain. And sales relative to supply is also improving, to 5.8 months vs 5.6 months in February and 5.1 months a year ago. Supply at 6.0 months relative to sales is generally considered to be consistent with a balanced market.
New homes aren’t showing much price traction, down 3.2 percent in the month to a median $288,000 which is down, not up, 1.8 percent from last year.
Regional data are mixed. The Midwest shows an oversized gain in March with the South a solid gain and with year-on-year rates very solid for both, in the low to mid-double digits. But the West, which is a key region for new homes, is definitely lagging, down more than 20 percent on both the month and the year.
Spring is the big season for the housing market and this report, together with an uptick in last week’s March report for existing home sales, do keep the door open for a solid season, one that could contribute to a needed pickup in the pace of the overall economy.
Recent History
New home sales have held near a 500,000 annualized pace since first approaching the rate in late 2014, this despite high levels of employment and low mortgage rates where the 30-year is still below 4 percent. The number of new homes coming into the market has been improving but is still lagging and holding down sales. Prices, however, are low and probably not holding down sales, showing only marginal sub-3 percent appreciation in this report. Forecasters see new homes holding near prior rates, up slightly to a 522,000 annualized rate for March which would follow last week’s improvement in existing home sales to a 5.330 million rate.
Lack of News Homes Holding Down Sales?
Bloomberg noted “lack of new homes on the market has been holding down sales.”
Unlike existing home sales, new homes sales are recorded the moment a contract is signed. Thus, new home weakness is based on demand (or lack of demand) not lack of supply.
Bloomberg notes supply is “balanced”. That’s further evidence of the silliness of their claim supply is holding down sales.
Price action is telling. Anyone who wants a home and can afford an expensive home, likely already has one. This is not a market in which builders want to start masses of homes on spec. Doing so would further depress prices.
Mike “Mish” Shedlock
Robert Schilling’s research showed that over time, housing prices only appreciate at the rate of inflation. Inflation is running about 1.5% and doesn’t seem to be growing.
Paying 4% interest, and 3% taxes, insurance and maintenance, means housing is financially a big loser.
Paying $1680. per month in rent for this “average” $288,000 house, 7% of the home’s value, is an even poorer financial decision, considering a pile of rent receipts don’t appreciate or build equity. In fact, rents only go up with inflation.
$1680 for rent “may” barely be enough to rent a 2 bedroom apartment in Eastern Massachusetts or anywhere in CT (excluding fairfield county).
$1680 in the NYC metropolitan area won’t even be enough for a basement studio apartment in Nassau or Suffolk county. In NYC, average rent now around $3,000. Buying a house or even a co-op apartment as a first time buyer is nearly impossible without a $300,000 a year income
My lord, why would anyone choose to live in an open sewer like NYC?
That depends on whether you know anyone or not, and whether it’s near mass transit. You can still get a 1 bedroom in one of the outer boros for 2 grand. Admittedly that means a two fare zone and/or being lucky; but they are there. As for being an open sewer; that’s not true. It’s gotten much cleaner since I was a kid. Also, you have a lot here re entertainment.
House prices are also dependent in many respects on ease of transport into Manhattan. They’re getting stupid even in the outer boros, nothing under $500,000. As for Manhattan prices, in truth I don’t even look; it’s all just too stupid.
PLnL, I’m in nearly the same circumstance, but I continue to save my ‘bong-o bucks’ while shopping for the right builder. With cheap energy, cheap commodities, low interest rates, and an abundance of excess labor in construction, eventually it’s going to make sense to build the home I’ve wanted.
As long as you’ve always only wanted a shanty.
Paying $1000-$1200, which is more realistic, makes it more sensible to rent. In Japan, which the West is emulating a generation in arrears, going into debt to buy at or around the early 90s peak wasn’t exactly the soundest of “investments.” (As if the unmitigated idiocy of considering a roof over ones head in a harsh climate an “investment,” isn’t full throttle Retardus Maximus to begin with)
You’re also less of a sitting duck ready for the fleecing, if you rent. Owners will get hosed hard by increasingly insolvent municipalities, while renters can easier hop-skip to greener pastures.
Once upon a time, Levitt build homes for the CPI adjusted equivalent of about $70,000. Now youngsters are expected to pony up $300,000, while paying off their $100,000 student loans (education inflation).
Inflation is out of control. Printing is the bank’s war on youngsters.
A lack of inventory is not the problem with sales. The problem sales are stagnating is that builders are having a very difficult time bringing quality, affordable homes to market. Builders were busy chasing the Fed’s “wealth effect”, and now that illusion of wealth is deteriorating along with the real economy…
http://aaronlayman.com/2016/04/new-home-sales-decline-511000-annual-rate-march/
The purpose behind blowing financial bubbles and calling it growth is to get to the “Final Solution” of rule by decree.
The fact is having a dictatorship solves a lot of problems for “the ownership class” and this iteration is meant to be no different than the previous ones save for scope (to include the totality of the American people) and scale (the end of the pretense of the Rule of Law, that any American has any rights period…let alone a right to hold property.)
Everything else is just the Sturm and Drang of the entertainment complex…the avoidance of the reality that our life is just death magnified.
Yes you have to pay for that entertainment…and the fact that you are that entertainment actually.
Sad ending to a great Republic let alone Federal System of Governence….but one need only read the headlines to get the “news” now.
True story and still ongoing across the street from my house. The owners of the home simply walked away from it three years ago and filed bankruptcy. This home has sat without any utilities during this period. The previous owners just left all of their trash in the home and it was finally cleaned up two weeks ago. The place well smelled really bad.
We park an old vehicle in the drive way because squatters have cased the place several times. The other day the banker knocked on the door and asked us to move the vehicle as they were marketing the home as is and was asking what home comps in the neighborhood. The realtor showed up and they were both perplexed as to why no one was even offering close to what they think it is worth.
I took them in the home and showed them the reason why. There is 40 to 50k in repairs needed to even occupy the home. There is mold in one bedroom, all of the bathroom vanities and the kitchen cabinets needed to be replaced as the previous owners children basically tore off all of the cabinet doors. The place is filthy and still smells all floorcovering must be replaced and the slab treated to eliminate the smell. This was some of the big stuff. Unlike what you see on HGTV most people here will not pay full price for a home you cannot occupy until it is gutted and repaired.
The wife and I made a cash offer and are still awaiting their reply. Most likely they will hold out until some dummy comes along and pays full price and then must spend another 50k restoring the home. They will never get their money back of course being overpriced for the area.