by CalculatedRisk on 5/19/2012
We can’t directly compare single family housing starts to new home sales. For starts of single family structures, the Census Bureau includes owner built units and units built for rent that are not included in the new home sales report. For an explanation, see from the Census Bureau: Comparing New Home Sales and New Residential Construction
We are often asked why the numbers of new single-family housing units started and completed each month are larger than the number of new homes sold. This is because all new single-family houses are measured as part of the New Residential Constructionseries (starts and completions), but only those that are built for sale are included in the New Residential Sales series.
However it is possible to compare “Single Family Starts, Built for Sale” to New Home sales on a quarterly basis. The Q1 2012 quarterly report was released this week and showed there were 77,000 single family starts, built for sale, in Q1 2012, and that was below the 83,000 new homes sold for the same quarter (Using Not Seasonally Adjusted data for both starts and sales).
This graph shows the NSA quarterly intent for four start categories since 1975: single family built for sale, owner built (includes contractor built for owner), starts built for rent, and condos built for sale.
Single family starts built for sale were up about 17% compared to Q1 2011. Usually Q2 is the strongest quarter seasonally, and single family starts, built for sale, will probably be close to 100 thousand in Q2 – the highest level since 2008.
Owner built starts were up 30% year-over-year from a record low in Q1 2011. And condos built for sale are still near the record low.
The ‘units built for rent’ has increased significantly and is up about 41% year-over-year.
The second graph shows the difference (quarterly) between single family starts, built for sale andnew home sales.
In 2005, and most of 2006, starts were higher than sales, and inventories of new homes increased. In 2008 and 2009, the home builders started far fewer homes than they sold as they worked off the excess inventory they had built up in 2005 and 2006.
For the last 2+ years, the builders have sold a few more homes than they started, and inventory levels are now at record lows. In Q1, builders started 6 thousand fewer homes than they sold.
Note: new home sales are reported when contracts are signed, so it is appropriate to compare sales to starts (as opposed to completions). This is not perfect because of the handling of cancellations, but it does suggest the builders are keeping inventories.