Contracts for new, single-family home sales expanded by 17.5% in November to a 733,000 seasonally adjusted annual rate, according to estimates from the joint release of HUD and the Census Bureau. The particularly strong growth rate was due to a large downward revision for the October estimate (624,000, originally 685,000). However, the November sales rate was the fastest pace since July 2007. The expansion is supported by ongoing job growth and improving owner-occupied household formations, as well as tight existing home inventory.

Despite some volatility in the month-to-month sales figures, November marks the seventh month in 2017 at an annual sales pace of more than 600,000. New home sales through November are running 9.1% higher than this time in 2016, in line with NAHB’s forecast. The volatility in the data series suggests some pullback is likely in the December and January reports.

Inventory was flat in November, holding at 283,000 homes for sale. The current months’ supply stands at a healthy, if tight, level of 4.6. Given tight existing inventory, more new homes are required to meet housing demand.

This is sharply illustrated by the most recent data, which indicate a growing share of homes not-started in builder inventory. For example, on a year-over-year basis, the count of homes under construction in inventory have increased by 12% over the last year. Completed, ready-to-occupy homes (there are only 64,000) are up 5% since November 2016. In contrast, homes not-started listed in inventory have increased 41%.

Sales of homes not-started construction have also been rising, increasing to a 258,000 seasonally adjusted annual rate in November, a 65% annual gain. These factors are consistent with positive housing demand, a supplied-side constrained building market, and the rising traffic measure in the NAHB/Wells Fargo HMI.

Median new home sales price (price of the home in the middle of the distribution) fell to $318,700 in November. Average home price declined to $377,100. Managing rising construction costs in the months ahead will be a key challenge for housing affordability, as input costs increase. Indeed, strong sales growth was recorded in the $200,000 to $300,000 price class, with such sales up 30% for November 2017 compared to November 2016.

Regionally, there was sales growth in all regions. On a year-to-date basis, home sales are up 30% in the Northeast, up 18% in the Midwest, 6% higher in the West, and up 1% in the South compared to September 2017.

Tags: economics, home building, housing, sales, single-family