February New Home Sales Flat After Upward Revisions to Prior Months

Contracts for new, single-family home sales were effectively flat in February, inching down 0.6% to a 618,000 seasonally adjusted annual rate, according to estimates from the joint release of HUD and the Census Bureau. Matching solid readings of the NAHB/Wells Fargo HMI measure of home builder confidence, new home sales data for prior months were revised up. For example, the initial January estimate of a 593,000 annual pace was increased to 622,000.

Despite some volatility in the month-to-month sales figures, February marks the sixth consecutive month at an annual sales pace of more than 600,000. New home sales are currently more than 2% higher on a year-to-date basis relative to 2017 and continue to move along the modest growth trend established in the years after the recession. Supply-side constraints on construction continue to limit inventory and sales.

 

Inventory increased in February to 305,000 single-family homes for sale. The current months’ supply stands at a healthy level of 5.9. Given tight existing home inventory, more new homes are required to meet housing demand.

This is illustrated by the most recent data, which indicate a significant share of homes not-started in builder inventory. For example, on a year-over-year basis, homes under construction in inventory have increased by 17% over the last year. Completed, ready-to-occupy homes (there are only 68,000) are up only 8% since February 2017. In contrast, homes not-started listed in inventory have increased 23%.

Median new home sales price (price of a home in the middle of the distribution) increased to $326,800. Managing rising construction costs in the months ahead will be a key challenge for housing affordability, as input costs increase. Regionally, home sales were up 19% in the Northeast, 9% in the South, and down 4% in the Midwest and 18% in the West.



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