New Home Sales Expand Moderately


Sales of new single-family homes rose 0.8 percent in June 2017 to 610,000 as reported jointly by the Census Bureau and the Department of Housing and Urban Development. The June increase reflected a downward revision to the estimate of new home sales in May. If the May sales number remained at its initially reported level of 610,000, then sales would have been unchanged.

However, additional information suggests that nationwide sales are expanding. Sales are 9.1 percent above their level 12 months ago. At the same time, on a year-to-date basis (Jan-Jun 2017), sales are 10.9 percent above their pace over the first half of 2016.

Regionally, the nationwide gain in sales over the month reflected a 12.5 percent increase in the West, and a 10.0 percent increase in the Midwest. Sales in the Northeast were unchanged while they fell by 6.1 percent in the South. Over the past 12 months sales recorded double-digit growth in the Northeast (41.4 percent) and the West (33.3 percent). Meanwhile sales rose 0.9 percent in the South, but fell 12.0 percent in the Midwest during this time period.

New home inventory has also risen. The inventory of homes rose 1.1 percent to 272,000 over the month of June. This level is also 11.9 percent above the inventory in June 2016. Because the pace of growth in the number of homes for sale exceeded the number that were sold, the months’ supply also rose. Over June, the months’ supply increased by 1.9 percent to 5.4 months, 3.8 percent higher than one year ago. Nevertheless, the months’ supply, which measures the number of months it would take to exhaust the inventory at the current sales pace, remains below the healthy 6.0 benchmark.

The median sales price fell 3.4 percent over the past 12 months on a not seasonally adjusted basis to $310,800. However, because sales have been trending upward, this decline may reflect a compositional shift rather than an erosion in market fundamentals. Over the past 12 months the proportion of new home sales priced below $300,000 rose 3 percent to 47 percent. Conversely, sales at prices $300,000 and above fell 2 percent to 53 percent. The difference in the changes likely reflects rounding.

At the halfway point of 2017 most indicators suggest that sales continue to expand. The year-to-date increase remains consistent with NAHB’s expectations for sales over 2017. At the same time, months’ supply has expanded, due more to an increase in inventory of homes as opposed to a sales decline. Despite the increase, the months’ supply remains low, partly as a result of challenges faced by builders, and could erode some growth in new home sales.

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