New Home Sales Less Than Half of Historical Norms

Historic NormsThe current level makes up 88.3% of the 50-year average, according to a report from Trulia. However, new home sales are unable to keep up with the rate of total sales.  How many new home sales do we need for the market to look normal?  According to Trulia Chief Economist Ralph McLaughlin, if we compare the share of new home sales to total sales, that share needs to more than double.  “In April, new home sales made up about 11.9% of all home sales, which is less than half of the historical average of 23.6%,” McLaughlin said.

However other experts explain this drop in April comes as no surprise after the past several months of high home sales.  “After soundly beating expectations in every month to start 2017, it’s not very surprising to see new home sales come back to Earth in April,” said Zillow Chief Economist Svenja Gudell.  He added that while some worry about the double-digit monthly decline from March, it’s important to keep all the numbers in context.  “Data from the first 3 months of the year were all revised upward, and at a seasonally adjusted annual rate of 569,000, April new home sales were still higher than in all but 4 months of 2016,” stated Gudell.

But not all economists say the drop is positive or even normal. One expert explains this drop brings unwelcome news to homebuyers who are already struggling with limited inventory.  “New home sales plummeted 11.4% in April – bad news, especially for first-time and lower income buyers,” said Senior Economist Joseph Kirchner.  “This month’s drop in home sales and the stagnation in new home inventory will continue to exacerbate the national inventory shortage which will result in even higher prices and lower affordability.”

However, prices didn’t increase. The report showed home prices dropped to $309,200, down from last month’s $315,100. And while home sales may be down, housing inventory increased slightly.  “Inventory continues to grow, albeit slowly,” said Robert Dietz, National Association of Home Builders senior vice president and chief economist.  “The largest year-over-year gains in new home inventory are among homes not-started construction,” Dietz said. “Completed, ready-to-occupy new homes in inventory total only 59,000 on a nationwide basis.”

Source:  Housing Wire/Trulia/HUD/U.S. Census Bureau