- New home sales in August grew strongly, and cappedthe best 12-month span since September 2008. Post-recession, homebuyers continue to turn to new homes as the inventory of existing homes on the market dwindles.
- The 12-month rolling total of new home sales were about 83% back to normal, but when taking into account the number of U.S. households, is only about 63% of the way there.
- While new home sales are helping homebuyers constrained by low resale inventory, the share of all home sales made up by new homes is still low. In August, new home sales represented about 11.5% of all sales, which is less than half of the pre-recession average of 23.6%.
- Although it’s been tough for homebuyers to buoy existing home sales because of low inventory, it looks like there is solid potential for new homes sales to run higher before the end of the current economic cycle.
New home sales in August were at a seasonally adjusted rate of 609,000, which is up 20.6% year-over-year. While August’s numbers are statistically significant, the range is wide: the true number could be as low as 6% or as high as 35%. A less volatile number to look at is the 12-month rolling total, which is up 11.1% year-over-year, and represents the best one-year span since September 2008. The increase over last year put’s the 12-month total at 83.4% of the 50-year average, up 1.4 percentage points from July.
However, the 12-month rolling total of new home sales compared to the 50-year average looks worse when taking into account the size of the U.S. population. New home sales per 1,000 U.S. households was 4.6 in August, only 63.4% back to normal. This comparison suggests today’s households aren’t buying new homes at the rates of past generations, likely due to fewer new homes being built but at a less affordable price.
How many new home sales do we need for the market to look normal? If we compare the share of new home sales to total sales, we need about double. In August, new home sales made up about 11.5% of all home sales, which is less than half of the historical average of 23.6%. While it’s been tough for homebuyers to buoy existing home sales because of low inventory, it looks like there is potential for new homes sales to run higher before the end of the current economic cycle.
