- Looking past monthly volatility, the 12-month rolling total of new homes sales was the best in over eight years and boosts sales to 85% of the 50-year norm.
- New homes are helping satisfy homebuyers constrained by low resale inventory, but sales have room to grow. In October, new home sales represented about 11.6% of all sales, which is less than half of the pre-recession average of 23.6%.
- How will new home sales fare in 2017? While it’s still uncertain how a Trump administration will affect homebuilding activity, over half of all new home sales are in the red-leaning South, where homebuyer and builders may be feeling a renewed sense of confidence about the year ahead.
New home sales in October were at a seasonally adjusted rate of 563,000, which is up 17.8% year-over-year. While October’s year-over-year number is statistically significant, the 1.9% drop month-over-month is not. A less volatile number to look at is the 12-month rolling total, which is up 13% year-over-year, and represents the best one-year span since August 2008. The increase over last year puts the 12-month total at 85% of the 50-year average, up 1 percentage point from September.
However, the 12-month rolling total of new home sales compared to the 50-year average looks like there’s a lot more room to grow when taking into account the size of the U.S. population. New home sales per 1,000 U.S. households was 4.7 in October, which is only 64% back to normal.
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, that share needs to more than double. In October, new home sales made up about 11.6% 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 much potential for new homes sales to run higher.
Last, how will new home sales fare in 2017? While it’s still uncertain how a Trump administration will affect homebuilding activity, over half of all new home sales are in the red-leaning South, where homebuyer and builders may be feeling a renewed sense of confidence about the year ahead. As such, both demand and supply is likely to benefit, at least in the short run, and we expect increases in sales to at least occur in Southern Red states.
