New homes sales rose at a seasonally-adjusted annualized rate(SAAR) of 621,000 in March vs. an Econoday expectation of 588,000.
All elements are kicking in for housing right now with prices showing strength, permits moving up, and also sales on the climb. New home sales came in much stronger than expected, at a 621,000 annualized rate in March which was last exceeded by a 622,000 rate in July last year but is otherwise, by far, the best of the expansion.
The surge in sales did not come at the expense of pricing which, on the contrary, was very strong in March, up a monthly 7.5 percent to a median $315,100. The year-on-year rate, at only 1.2 percent vs 15.6 percent for sales, offers room for further price gains ahead. Supply did move into the market, up 3,000 to 268,000 units, though relative to sales remains thin at 5.2 months vs 5.4 months in February and January and 5.5 months in March last year.
The West is the standout region, up 16.7 percent in the month to a 175,000 rate and a 33 percent year-on-year gain. The South is by far the largest region for new homes, up 1.6 percent in the month to 323,000 and a 5.9 percent year-on-year gain. Also having a good month was the Northeast, up 26 percent in the month to 39,000.
Existing home sales (in data released last week) are also at expansion highs as are most prices (this morning’s FHFA and Case-Shiller reports). The new home sales market is a central feature of the housing sector and will set the pace for housing in general, one that increasingly points to a very strong 2017.
Post-Crisis High
Mortgage News Daily reports New Home Sales Nearly Match Post-Crisis High.
Sales of newly constructed homes appear to have stopped, at least for the moment, their up-one-month, down-the-next pattern. They rose for the third consecutive month in March, and did so convincingly.
The Census Bureau and the Department of Housing and Urban Development say that sales of new homes jumped 5.8 percent in March, to a seasonally adjusted annual rate of 621,000 units. The rate nearly tied that of July 2016, 622,000 units, for the highest sales pace since the housing crisis. March also marked the first time since last July that sales have topped 600,000. March sales were up 15.6 percent compared to the previous March when the annual rate was 537,000.
On a non-adjusted basis, there were 58,000 new homes sold. This is 10,000 more sales than in February and 8,000 more than the previous March.
Median prices had declined slightly in February but resumed their upward trend in March. The median price was $315,100 compared to $311,400 a year earlier. The average price of a home sold was $388,200 compared to $367,700 in March 2016.
Sales in the Northeast were up 25.8 percent from February and 21.9 percent from the previous March. The Midwest had a month-over-month slip, down 4.5 percent but were up 23.5 percent on an annual basis. There was a 1.6 percent monthly increase and a 5.9 percent annual one in the South while the West saw gains of 16.7 percent and 32.6 percent respectively.
At the end of the reporting period, there were 266,000 (unadjusted) homes available for sale. This is an estimated 5.2-month supply. More than half of available homes, 148,000, were under construction. The median time on the market was 3.7 months.
New Home Sales
The above chart puts new home sales in a light. Also, note there is no “acceleration” just a steady upward trend.
Why Rent?
Also consider Existing Home Sales Best Since February 2007: Good as it Gets?
These reports add a few ticks to my GDP estimate for the first quarter. I will post an estimate later today along with the range of estimates in play.
Mike “Mish” Shedlock
While home prices are rising at TWICE the rate of Average Hourly Earnings.
AND Mortgage Rates (30 yr. fixed) are more than 50 bps higher than they were a year ago.
If I didn’t know any better, I’d be tempted to think think “the economy” must be booming.
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If you plot a line across the peaks in the early 60s, early 70s, early 80s and late 90s and exclude the bubble of the 2000s, then it appears that the next high point on the line will be sometime around 2030 assuming a constant rate of growth. I’m cool with that.
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‘zactly…trade’m like stocks…asset is an asset is an asset….
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Bill McBride of the Calculated risk blog has remained steadfastly bullish on the overall housing recovery for several years now. Well done to Bill.
I’m waiting for him to give a clear bearish signal before considering selling some rental homes i picked up in the 2010-2012 time frame.
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Easter
New home sale considered a “sale” when contract signed … not at closing.
For most folks that means visiting … and signing … on a non holiday weekend.
Easter in March for 2016… skewing year over year numbers.
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Ok, so the monthly number was not as good as everyone said. But that doesn’t change the chart above showing a steady linear increase in new sales from the low. In fact, the rate of growth in new sales is actually lagging prior expansions in decades past.
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Fundamentals:
https://fred.stlouisfed.org/graph/?g=duDF
https://fred.stlouisfed.org/graph/?g=duDj
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How do you interpret the charts you posted?
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Is there really a question why we are in another housing bubble so soon?
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Mel Watt’s plan to loosen mortgage credit will shape housing finance for years
Joseph Lawler | May 17, 2014 | Washington Examiner
For Republicans, it was the moment they had feared when, for months, they blocked President Obama’s nomination of the former North Carolina Democratic congressman to his current post as director of the Federal Housing Finance Agency. As the conservator — the government steward — for Fannie and Freddie, the FHFA has massive influence over the mortgage market.
Watt began his speech noting “certain changes in focus” from the plans laid out by his fiscally conservative predecessor Ed DeMarco, and then outlined a number of plans to loosen the terms that Fannie and Freddie require for the loans they insure. The two government-sponsored enterprises buy loans from lenders and package them into insured securities, with the purpose of increasing liquidity in the mortgage markets.
Americans may understandably be concerned about the standards Fannie and Freddie require for the loans they guarantee — the two did receive $188 billion in bailout funds after risking trillions on bad loans.
But Watt’s decisions will not just shape the short-term availability of mortgage credit. They also will play a critical role in shaping the housing finance system for years.
For his part, Watt said that his plan “allows us to meet our mandates of upholding safety and soundness and ensuring broad market liquidity.” With reform legislation in both the Senate and House apparently stalled for the near future, the health of the housing market depends in large part on Watt’s judgment.
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Chasing that dream may not end well. The leverage is substantially higher then it was in 2008 and the only thing keeping it alive is that interest rates are kept down as leverage against a stock market sell-off. Buying homes in this market, at these prices is nuts. Wait until all these rentals are built and we then see what happens.
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“Buying homes in this market, at these prices is nuts. Wait until all these rentals are built and we then see what happens.”
Those two things are entirely unrelated. Why would someone in the market for a single family home decide that they’re going to continue renting an apartment just because it is newly built?
But since you brought up multi-family, I’ll point out that construction has peaked and vacancy rates are still favorable in most of the country.
If you’re looking for a bubble, call me when your barber is flipping houses.
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I think he means that one has a choice — pay high rents or buy an inflated SFH. I know people who see both numbers high and use the current rents to justify buying a home. They don’t buy because they are in the market for a SFH but instead go for the cheaper option. In fact, from my experience (I live in Bay Area), when a family decides to buy, it buys no matter the price (this is because the real estate agent tells them prices double every 10 years).
Now, when new rentals start propping up (as they are in Bay Area right now), the rents start dropping (they have dropped a bit recently). Also, a lot of these homes that are being bought now are back in the rental market, so those numbers also help ease (for example, a family was looking to rent a 3 bedroom home and they found a SFH but right before they signed, another SFH owner offered them a 4 bedroom home for 100$ cheaper — both owners are foreigners).
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Also, you made another dumb comment that needs to be pointed out: the last housing bubble had a catalyst in that there were huge numbers of people in sub prime ARMs. That is not the case today. There is no catalyst.
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“There is no catalyst.” That must be some really good stuff you are smoking. In a sense you are right, there is no single catalyst this time. There are multiple catalysts. All that remains is for the fuse to be lit.
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Catalysts are only catalysts in hindsight. Until then, they are “financial innovations.”
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It is true that hot Chinese cash is a catalyst on the West Coast and in BC and Australia. We’ll see how long that lasts.
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Looks like new home sales could continue to grow 3-5%/yr for another decade before being considered heated up.
If millennials are finally moving out of their parents basement there could easily be another 5 million household formations.
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I’m on the older end of the millennial generation, and many of my peers are just now starting families in their mid 30’s. Expect another wave of demand for suburban single family homes in the coming 5-10 years.
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Mortgage interest is still at all time lows but fear of rising rates is high.
Add to that that low interest rate zero down loans are available from the VA, but for how long is a question.
For many potential buyers it is now or never.
For many potential sellers it is also now or never.
We are approaching a cyclical peak in home sales. For people in the suburbs of Chicago this can be their last chance to escape. Retirees are downsizing and moving to low tax areas.
Real Estate is an asset that is NOT LIQUID and few understand what is necessary to ride out the ‘cycles’ that come with it.
We already have a looming crisis in bad auto loans and a looming crisis in bad home loans is coming.
California is offering generous terms to home debtors who should not be home owners and will tax savers to pay for it.
Politicians protect banks first and real estate second and major donors such as healthcare. People who do the right thing are always LAST.
My advice to Mish is to MOVE.
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Having just purchased a home in SoCal, I found the underwriting process very strict and PMI is inescapable without 20% down. Foreclosures are at lows, very low inventory especially for flippers. It is nothing like 2006.
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I had to buy last year, we were getting taxed to death and I was tired of moving my kid every other year. We got 3.5 on a 30 year jumbo and my mother is staying with us and bought 20 percent of the house since we bought a house with mother in law quarter’s. I have had the same job forever and since I bought I feel I can lose this job tomorrow. My other stable PRN job is also suddenly shaky. We bought at 17 percent DTI but still feel unstable. Could not imagine taking on a house in a real bubble area, what I paid for 2.5 acres of ground and 6000 sqft would not buy a tear down in parts of Clownifornia.
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