After a surge in the pace of new home sales in July and August, the monthly growth rate of newly built single-family home slowed during the Fall. While the level of sales remains elevated and at post-Great Recession highs, sales have exceeded construction starts by a historic margin at the end of the summer. This necessitated an increase in starts and some slowing of sales. Nonetheless, the acceleration of sales has left new home inventories at a more than three-year low.
According to the last week’s estimates from the Census Bureau and HUD, October new home sales declined by 0.3% for the month to a 999,000 seasonally adjusted annual rate. This is registered off of upward revisions for August and September to 1.001 and 1.002 million annual sales rates respectively. Despite recent flat growth conditions, the October sales rate was 42% higher than a year ago, as housing demand continues to be supported by low interest rates, a renewed consumer focus on the importance of housing, and rising demand in lower-density markets like suburbs and exurbs. Sales are up 20.6% on a year-to-date basis for 2020 thus far.
Looking back to the spring, the April data (570,000 annualized pace) marks the low point of sales for the current recession. The April rate was 26% lower than the prior peak, pre-recession rate set in January. Sales have mounted a historic growth rate since that time.
Sales-adjusted inventory levels marked a fourth consecutive month below a 4 months’ supply, coming in at 3.3 in October. Overall, inventory levels in October were at their lowest level since July 2017, with a total inventory level of homes for-sale (of homes both started and not started construction) of 278,000. At the cycle peak in December 2018, there were 346,000 new homes for sale. The largest declines have been recorded for completed homes for sale, which have fallen from 77,000 in December 2019 to just 44,000 in October.
Consequently, sales growth has ramped up for new homes that have not started construction, with that count up 100% year-over-year in October. These measures point to continued gains for single-family construction ahead.
Thus far in 2020, new home sales are higher in all regions. Total new home sales are up almost 21% on a year-to-date basis. Sales are 19% higher in the South, 20% in the West, 30% in the Midwest, and 30% higher in the Northeast.