May new home sales: Another poor month for sales, prices stable, inventory increasing
– by New Deal democrat
To start with the usual: new home sales are very volatile and heavily revised, which is why I pay more attention to single family permits. But they are the most leading of all the housing data; and averaged over three months, much of the noise goes away.
In May, new home sales declined -46,000 annualized to 580,000, just above their 3+ year low set in January:
This likely in part reflects the recent uptick in mortgage rates – but again it is within the range of noise. The three month moving average is virtually unchanged, but at the low level it has been for most of this year so far, which suggests that single family permits (red, right scale), which convey more signal, are likely to hold steady or even decline further from their recent range.
Meanwhile, the median price for a new home – which is not seasonally adjusted, so should be compared YoY – was almost exactly unchanged from one year ago (red, left scale):
The longer term trend over the past three years of slowly declining prices remains intact.
This is largely in accord with existing home sales, where the median price through May was up 1.3% YoY, and the Case Shiller and FHFA repeat home sales prices, which were up 0.7% and 1.7%, respectively. The difference is that home builders can change, and have changed, price points, not just by lowering profit margins, but also by building more densely, or smaller square footages, or fewer amenities – which they have done.
Finally, let’s look at the inventory of new houses for sale. As a refresher, here is the historical view of the leading/lagging relationship between the number of houses sold and houses for sale:
Inventory is generally the last shoe to drop in the housing market before recessions begin. But as I noted last month, there has been an interesting wrinkle this year, as inventory has turned back up:
This is all but unique. Historically a recession will not occur until inventory turns down again. But to reiterate, housing has been recessionary for a year, and yet no recession has occurred. The same has been true for motor vehicle sales.
In summary: not a good report, it looks like housing is taking another step down. But no upward price pressure, and no indication of broader negative implications for the economy.
The Bonddad Blog
“April new home sales: prices somnolent, an interesting wrinkle in inventory,” Angry Bear by New Deal democrat