New Home Sales Drop in February

Dennis Norman

The U.S. Department of Commerce released a report showing the sale of New Homes in February were at a seasonally adjusted annual rate of 308,000, a 2.2 percent decrease from the revised January rate of 315,000 and is 13.0 percent below a year ago.
The inventory of new homes (seasonally adjsuted) at the end of February is 9.2 months a slight increase from January’s inventory of 9.1 months.

My Mantra

As has been my long-running mantra, I don’t like “seasonally adjusted” numbers and “rate” of sales. Why, for one I can’t figure out how in the world they compute the numbers. Second, I just don’t think discussing New Home Sales September 2009the “rate” of new home sales paints a realistic picture of the market. I think this holds especially true when we have artificial forces affecting the housing market such as tax credits and other incentives. This can create unseasonal bursts or declines in sales that don’t really have anything to do with the underlying fundamentals of the housing market.

Here is the raw data, the ACTUAL new homes sold- no fluff, no “adjusting”

  • 24,000 new homes sold in February, a 9.0 percent increase from January”s 22,000 new homes sold and also a 17.2 percent decrease from February 2009 when there were 29,000 new homes sold.
    • 45.8 percent (11,000) of the new homes sold were in the South region- the same number of homes sold in January in the South
    • the west region had 8,000 new homes sold, an increase of 33 percent from February
    • the Midwest had 3,000 new homes sold, the same as the prior two months.
    • The Northeast had 2,000 new homes sold, a the same as last month.
  • YTD – In the first two months of 2010 there have been 46,000 new homes sold, a decrease of 13.2 percent from the same time last year.
  • Median sale price of new homes in the US in January was $220,500, an 8.3 percent increase from February’s median new home price of $203,500.
  • New Homes in the US in January have been for sale for a median time of 14.4 months since the homes were completed; this number has been increasing every month.

My prediction for 2010

I hate to be so negative, but I just don’t like what I’m seeing in the new home market. Near record low interest rates, home buyer tax credits as well as beaten down prices just has not had much of a positive effect on new home sales. We are at record low numbers for new home sales and there doesn’t seem to be anything that is going to change this dramatically anytime in the near future.

In addition, I am concerned we may have a second “mini-bubble” coming. I say this because, as I wrote a few days ago, new home construction, even though at greatly reduced numbers from it’s peak, is still significantly out pacing new home sales. In February new home construction starts were at a seasonally adjusted rate of 499,000 home; 62 percent higher than the seasonally adjusted new home sales rate for the same period. Looking at just raw data (not seasonally adjusted) there have been 65,100 new homes started in the first two months of this year; 42.4 percent more than the 46,000 new homes that were sold in the same period. If this trend continues new home inventory is going to continue to grow and, if sales don’t increase significantly, we may very well find ourselves back where we started soon.

As far as my prediction for new home sales this year I’m going to stick with my estimate of 336,600 – 355,000 new home sales in 2010.

St Louis Real Estate – New Home Sales Fall again in December

Dennis Norman

The U.S. Department of Commerce released a report showing the sale of New Homes in December were at a seasonally adjusted annual rate of 342,000, a 7.6 percent decrease from the revised November rate of 370,000 and is 8.6 percent below a year ago.

My Mantra

As has been my long-running mantra, I don’t like “seasonally adjusted” numbers and “rate” of sales. Why, for one I can’t figure out how in the world they compute the numbers. Second, I just don’t think discussing New Home Sales September 2009the “rate” of new home sales paints a realistic picture of the market. I think this holds especially true when we have artificial forces affecting the housing market such as tax credits and other incentives. This can create unseasonal bursts or declines in sales that don’t really have anything to do with the underlying fundamentals of the housing market.

Effect of tax credits on homebuyers like kid’s “sugar-rush”?

Here is the raw data, the ACTUAL new homes sold- no fluff, no “adjusting”

  • 23,000 new homes sold in December, an 11.5 percent decrease from November’s 26,000 new homes sold and also a 11.5 percent decrease from December 2008 when there were 26,000 new homes sold
    • 52 percent (12,000) of the new homes sold were in the South region- a decrease of 14.2 percent from November’s 14,000 new homes sold
    • the west region had 5,000 new homes sold the same as the month before.
    • the Midwest had 3,000 new homes sold, a 40 percent decrease from November’s sales of 5,000 homes.
    • The Northeast was the only region with an increase in sales. Decmebers sales of 3,000 homes was a 50 percent increase from November’s 2,000 new homes sold.
  • 374,000 new homes sold in 2009 which is a 22.9 percent decrease from 2008 when there were 485,000 new homes sold.
    • All four regions saw fewer home sales in 2009 than 2008.
      • Midwest decrease of 22.9 percent
      • South decrease of 24.` percent
      • West decrease of 23.7 percent
      • Northeast decrease of 11.4 percent
  • Median sale price of new homes in the US in December was $221,300.
  • For the new homes sold in the US in December the median time they have been on the market for sale is 13.9 months.
  • Inventory of new home in US at end of December is 234,000 which translates into a 10.2 month supply.

So how accurate was my predicion for 2009?

For some time I have been predicting new home sales for 2009 would end up around 385,000 – 395,000…In November I pinned the number down at 390,000…I was feeling somewhat optimistic because of the tax credits. It looks like I was a little too optimistic and was off by 16,000 homes or 4.2 percent….I guess not too bad for an amateur…

My prediction for 2010

With everything going on in our economy, elections this year, etc, it is really hard to predict what will happen in the new home market. Having said that, I will say that I don’t see 2010 being worse than 2009, unless interest rates increase significantly during the year or unemployment does not improve. Abset those two events I am going to predict that 2010 will be just slightly better than 2009 and come in at 380,000 – 400,000 homes sold.

What does 2010 hold in store for the Housing Market?

Dennis Norman

In a just a few days we will say goodbye to 2009; a year that has been brutal to the housing market. So as the new year comes in, what will 2010 hold in store for the housing market?

To answer this question I turned to the housing forecast just released by Fannie Mae to see what their economists were predicting. Here are the highlights from the report, showing actual numbers for the 3rd quarter of this year as well as Fannie Mae’s projection for 4th quarter of this year as well as 4th quarter of 2010:

  • New Home Starts (seasonally adjusted annual rate)
    • 3rd quarter actual- 499,000
    • 4th quarter 09 projection – 502,000 (+0.06 % from 3rd quarter)
    • 4th quarter 10 projection – 650,000 ( +29.4% from the year before)
  • New Home Sales (seasonally adjusted annual rate)
    • 3rd quarter actual- 413,000
    • 4th quarter 09 projection – 442,000 (+7.02 % from 3rd quarter)
    • 4th quarter 10 projection – 510,000 ( +15.38% from the year before)
  • Existing Home Sales (seasonally adjusted annual rate)
    • 3rd quarter actual- 5,290,000
    • 4th quarter 09 projection – 5,623,000 (+6.29 % from 3rd quarter)
    • 4th quarter 10 projection – 5,492,000 ( -2.32% from the year before)
  • Median Home Prices-New Homes
    • 3rd quarter actual- $210,400
    • 4th quarter 09 projection – $214,600 (+2.0 % from 3rd quarter)
    • 4th quarter 10 projection – $211,400 (-1.5% from the year before)
  • Median Home Prices-Existing Homes
    • 3rd quarter actual- $178,300
    • 4th quarter 09 projection – $175,200 (-1.73 % from 3rd quarter)
    • 4th quarter 10 projection – $172,600 (-1.48% from the year before)
  • Mortgage Interest Rates (fixed-rate mortgage)
    • 3rd quarter actual- 5.16 percent
    • 4th quarter 09 projection – 4.88 percent
    • 4th quarter 10 projection – 5.32 percent

So there you have it. A somewhat encouraging forecast for the housing industry for next year. A prediction of increased new home sales, a little bump in existing home sales at the end of this year (from the homebuyer tax credit no doubt) and then a slight drop in sales next year from that rate, a slight drop in home prices in the next year and interest rates that are still attractive. If all this pans out 2010 will no doubt end up being a kinder year to the housing industry than 2009 was.

Ah, but wait…I know what you’re thinking…same thing as me. What do these guys know? After all wasn’t it Fannie Mae that had accounting issues, management problems and has been blamed by some to be a contributor to the housing bust? Well, lets take a look at their housing forecast from a year ago and how accurate their projections were then. For the sake of this comparison we will compare their forecast for the 3rd quarter of 2009 with the actual numbers from above:

  • New Home Starts (seasonally adjusted annual rate)
  • 3rd quarter 2009 actual- 499,000
  • 3rd quarter forecast – 526,000 (over by 5.41%)
  • New Home Sales (seasonally adjusted annual rate)
  • 3rd quarter2009 actual- 413,000
  • 3rd quarter forecast – 472,000 (over by 14.29%)
  • Existing Home Sales (seasonally adjusted annual rate)
  • 3rd quarter 2009 actual- 5,290,000
  • 3rd quarter forecast – 5,003,000 (under by 5.42%)
  • Median Home Prices-New Homes
  • 3rd quarter 2009 actual- $210,400
  • 3rd quarter forecast – $208,600 (under by 0.85%)
  • Median Home Prices-Existing Homes
  • 3rd quarter 2009 actual- $178,300
  • 3rd quarter forecast – $186,600 (over by 4.66%)
  • Mortgage Interest Rates (fixed-rate mortgage)
  • 3rd quarter 2009 actual- 5.16 percent
  • 3rd quarter forecast – 5.44 percent (over by 5.42%)
  • Considering all the factors that affect the housing market I actually think Fannie Mae did pretty good in their forecast last year. They overshot new home sales a fair amount but undershot existing home sales by a much smaller percentage. Overall on combined home sales they got within 4% of predicting the number of sales. I also think they did pretty good on median home prices.

    So, since Fannie Mae’s projections last year were fairly accurate lets hope the current projections will prove to be as well. If so, then it will be clear that the worst is behind us.

    New home sales take a dive in November

    Dennis Norman

     

    Dennis Norman

    New homes were started in November at an annual rate of 482,000 homes and I asked why in my post last week since new home construction was already outpacing sales….well, today the gap got worse..

    This morning the U.S. Department of Commerce released a report showing the sale of New Homes in November were at a seasonally adjusted annual rate of 355,000, an 11.3 percent decrease from the revised October rate of 400,000 and is 9.0 percent below a year ago.

    My Mantra

    As has been my long-running mantra, I don’t like “seasonally adjusted” numbers and “rate” of sales. Why, for one I can’t figure out how in the world they compute the numbers. Second, I just don’t think discussing New Home Sales September 2009the “rate” of new home sales paints a realistic picture of the market. I think this holds especially true when we have artificial forces affecting the housing market such as tax credits and other incentives. This can create unseasonal bursts or declines in sales that don’t really have anything to do with the underlying fundamentals of the housing market.

    Effect of tax credits on homebuyers like kid’s “sugar-rush”?

    Last month I described the effect of the homebuyer tax credits on the market like a kid’s sugar rush and said “come December we may very well see new home sales slow significantly and lose the momentum that was a result of the “sugar rush affect” on homebuyers of the tax credits that gave them that quick surge of energy and motivation to buy, but then quickly wore off as the urgency subsided with the extension of the credits.” Well, December is here and look what happened to new home sales. Kind of makes it appear I’m “in the know”, huh? Nah, just lucky and also predicting something that appeared to be obvious.

    Here is the raw data, the ACTUAL new homes sold- no fluff, no “adjusting”

    • 25,000 new homes sold in November, a 24.2 percent decrease from October’s 33,000 new homes sold and a 7.4 percent decrease from November 2008 when there were 27,000 new homes sold
      • 48 percent (15,000) of the new homes sold were in the South region- an decrease of 25.0 percent from October’s 20,000 new homes sold
      • the west region had 5,000 new homes sold, a decrease of 28.5 percent from October’s 7,000 homes sold
      • the Midwest held steady with 5,000 new homes sold, the same as October.
      • The Northeast had 2,000 new homes sold, a decrease of 33.3 percent from October’s 3,000 new homes sold.
    • 349,000 new homes sold this year through the end of November which is a 23.9 percent decrease from this time last year when there were 459,000 new homes sold.
      • on YTD new home sales all four regions of the US have seen a decrease from the year before
        • Midwest decrease of 23.2 percent
        • South decrease of 25.0 percent
        • West decrease of 24.5 percent
        • Northeast decrease of 15.2 percent
    • Median sale price of new homes in the US in November was $217,400, an increase of 2.4 percent from October’s median price of $212,200.
    • For the new homes sold in the US in October the median time they have been on the market for sale is 13.6 months.
    • Inventory of new home in US at end of October is 234,000 a 2.0 percent decrease from October’s inventory of 239,000 – this is very good news…

    My prediction

    For some time I have been predicting new home sales for 2009 would end up around 385,000 – 395,000…last month I pinned the number down at 390,000…I was feeling somewhat optimistic because of the tax credits but now I can see the numbers are probably going to fall short of my prediction. If you have been reading any of my posts for a while it’s kind of hard to believe I was overly optimistic, isn’t it?

    Merry Christmas

    New Home Sales in US through October; UP 5.1 percent OR DOWN 24.1 percent from a year ago, take your pick

    Dennis Norman

    Dennis Norman

    This morning the U.S. Department of Commerce released a report showing the sale of New Homes in October were at a seasonally adjusted annual rate of 430,000, a 6.2 percent increase from the revised September rate of 405,000 and is 5.1 percent above a year ago.

    My Mantra

    As has been my long-running mantra, I don’t like “seasonally adjusted” numbers and “rate” of sales. Why, for one I can’t figure out how in the world they compute the numbers. Second, I just don’t think discussing New Home Sales September 2009the “rate” of new home sales paints a realistic picture of the market. For example, in September there were 31,000 homes sold and the original “seasonally adjusted annual rate” of sales was given as 402,000 homes. In October there were 35,000 new homes sold and this 4,000 home increase over September boosted the Continue reading “New Home Sales in US through October; UP 5.1 percent OR DOWN 24.1 percent from a year ago, take your pick

    New home sales in Midwest down 5.8 percent in August

    Dennis Norman

    Dennis Norman

    By: Dennis Norman

    This morning the U.S. Department of Commerce released a report showing the sale of New Homes here in the Midwest region in August were at a seasonally adjusted annual rate of 49,000 units, a 5.8 percent decrease from July’s revised annual rate of 52,000 units (originally reported as 61,000  in July) and is down 31.9 percent from a year ago.

    house-construction

    The U.S. as a whole saw a slight 0.7 percent increase in new home sales in August over the month before and is down 3.4 percent from a year ago.

    The report does not break down new home median sale price data by region, but for the US the median price of new homes sold in August was $195,200 down 7 percent from July’s price of $210,100.  The average time on market for new homes sold in the US in August was 12.9 months up from 12.4 months in June and up 30 percent from a year ago when the median time on market was 9 months.  Continue reading “New home sales in Midwest down 5.8 percent in August

    New Home Sales in Midwest drop 7.6 percent in July; All other regions saw increase for July

    Dennis Norman

    Dennis Norman

    This morning the U.S. Department of Commerce released a report showing the sale of New Homes here in the Midwest region in July were at a seasonally adjusted annual rate of 61,000 units, a 7.6 percent decrease from Junes annual rate of 66,000 units. The U.S. as a whole saw a 9.6 percent increase in new home sales in July over the month before with the Midwest beign the only region not to show an increase for the month.

    house-construction

    New home sales in the Midwest for July 2009 lag 4.7 percent behind July 2008 new home sales which is better than the 13.4 percent decline from a year ago for new home sales in the US as a whole.

    Continue reading “New Home Sales in Midwest drop 7.6 percent in July; All other regions saw increase for July

    New home sales in Midwest increase a whopping 43.1% in June

    Dennis Norman

    Dennis Norman

    This morning the U.S. Department of Commerce released a report showing the sale of New Homes in June were at a seasonally adjusted annual rate of 384,000, an 11% increase across the US from May.

    However, here in the Midwest the numbers were significantly better showing a seasonally adjusted annual rate of 73,000 new homes sales in June, a 43.1% increase over Mays rate of 51,000 homes.  In addition, the Midwest was the only of region of the four in the U.S. that showed an increase in sales from the year prior.  In the Midwest, June’s rate is 5.8% better than June, 2008’s rate of 69,000 home sales.  The US market as a whole was down 21.3% from a year ago.

    Median prices for new homes in the U.S. decreased from $221,600 in May to $206,200 for June. Homes in the $150,000 – $299,999 range continue to dominate sales with 56% of the sales for June falling in this price range.  The Commerce Department does not publish median home prices or inventories for the regions so we can’t look at the Midwest alone.

    house-construction

    Perhaps the best news in the report is on the inventory of new homes. Inventory declined again to 281,000 homes which represents an 8.8 month supply based upon current sales rate. This is the lowest inventory we have seen in a long time and is a very positive sign to me. Continue reading “New home sales in Midwest increase a whopping 43.1% in June