- by New Deal democrat
Ive been looking at new and existing home sales more in tandem recently, as we are looking for a rebalancing of the market, with prices abating in existing home sales and inventory increasing, vs. new houses where prices have been slightly declining.
Additionally, as usual let me start with the important caveat that new home sales data are very noisy and heavily revised. And heavily revised they were, as October’s preliminary report of 610,000 annualized, which was the lowest rate since November of 2022, was revised higher by 17,000 to 627,000; and November rose another 37,000 from there to 664,000 annualized, still on the low side for the past two years:
The above graph shows single family permits as well, which tend to lag new home sales by a few months, but are much less noisy. New home sales are suggesting that permits will likely stagnate near current levels in the next few months.
The relatively low number of new home sales probably has much to do with the increase in mortgage rates close to 7%:
Inventory of new houses continued to increase to a 15+ year high. This is actually “good” news for the moment because as the below long term historical graph shows, recessions have in the past happened after not just sales decline, but the inventory of new homes for sale also decline:
Meanwhile the trend in prices continues to be slightly downward:
On a YoY basis, the median price of a new home is now -6.3% lower than it was one year ago.
Turning to xxisting home sales, they have been flat in the range of 3.85 -4.10 million annualized for almost two years. After breaking to the downside two months ago at a 10+ year record low of 3.83 million, November’s report increased to an eight month high at 4.15 million units annualized:
But the moderation in the YoY% change in prices from the past few months reversed somewhat as the median price for an existing home increased 4.7% YoY (below graph shows non-seasonally adjusted data):
On a YoY basis, in response to the longer term decline in inventory, existing home prices have risen consistently since 2014, and accelerated during the COVID shutdowns. After briefly turning negative YoY in early 2023, troughing at -3.0% in May, comparisons accelerated almost relentlessly to a YoY peak of 5.8% in May of this year.
Here are the YoY% comparisons since then:
June. 4.1%
July. 4.2%
August. 3.1%
September 2.9%
October 4.0%
November 4.7%
Putting the picture of new and existing home sales together, mortgage rates are putting a lid on sales of either (graph shows YoY new home sales and change in mortgage rates, the latter inverted so that lower rates show to the upside):
Prices of new homes have continued to follow sales:
And as shown above inventory in both new and existing homes have continued to increase. The big inventory of new house is presumably helping keep a lid on prices, while the inventory of existing houses, which also continues to increase, is still doing so too slowly to reverse price pressures. New houses continue to be the relative bargains. And both continue to be pressured by near 7% mortgage rates.
