Sales of newly-constructed single-family homes jumped 18% in August, hitting their highest sales pace since April 2008 and giving credence to the rising good mood among home builders.
The sales estimates, released by Commerce Wednesday, provide hard data aligning with developer confidence in the housing market, which is at its highest level since November 2005, the National Association of Homebuilders/
Wednesday's release included a revision of prior months' numbers, revealing that sales slowed only for one month (June) before bouncing back in July and surging quite dramatically in August. (Preliminary numbers showed sales at an annual pace of 412,000 in July, compared with a 427,000 revised annual pace.)
New home sales numbers (annualized, seasonally adjusted):
August 2014: 504,000
July 2014: 427,000 (revised from 412,000)
June 2014: 419,000 (revised)
May 2014: 458,000 (revised)
April 2014: 413,000 (revised)
Sales of new homes represent only about one-tenth of the housing market, and are revised frequently (three times), making them a less-reliable measure of the market. By contrast, the steadier Existing-Home sales reports from the National Association of Realtors track the bulk of the market, previously-owned homes. On Monday the latest report showed existing-home sales slowing by 1.8% after four straight months of increases. Sales were down 5.3% from a year earlier, when the pace stood at 5.33 million. Still, August sales stood at the second-highest pace of 2014. (July’s sales numbers, still the highest of the year, were revised slightly downward to an annualized pace of 5.14 million.)
Monday's existing home sales report also shows a decline in distressed sales (foreclosures and short sales), and investors exiting the market. Also, fewer buyers are purchasing homes with all cash. Both factors are helping normalize the housing market for regular buyers.
For years, new home sales and previously-owned tracked one another fairly closely, but during the recession, as more people purchased distressed homes, sales of new homes fell. Economist Bill McBride of the CalculatedRisk blog calls the gap between new and existing home sales the "distressing gap." Now, McBride writes, he is expecting that gap to close:
Another way to look at this is a ratio of existing to new home sales. This ratio was fairly stable from 1994 through 2006, and then the flood of distressed sales kept the number of existing home sales elevated and depressed new home sales. (Note: This ratio was fairly stable back to the early '70s, but I only have annual data for the earlier years).
The median sales price of a home sold in August was $275,600; the average sales price was $347,900. At the end of August inventory stood at 203,000, a 4.8-month supply at the current sales pace, according to the Commerce estimates.
Year-over-year, sales of new homes were up 33% in August, compared to the prior year. But as McBride points out, sales dropped dramatically during Q3 2013 as mortgage rates increased.
