by Bill McBride on 10/24/2012
New home sales have averaged 364,000 on an annual rate basis through September. That means sales are on pace to increase 19% from last year (and based on the last few months, sales will probably increase more than 20% this year).
Here is a table showing sales and the change from the previous year since the peak in 2005:
|Year||New Home Sales (000s)||Change|
|12012 pace through September.|
But even with a 20%+ increase this year, 2012 will be the 3rd or 4th lowest year since the Census Bureau started tracking new home sales in 1963. This year will be above 2010 and 2011, and it is possible – with a fairly strong last three months – that sales will be close to, or even above, the 375,000 sales in 2009.
This graph shows new home sales over the last few years. Although sales have increased this year, total sales are still very low. The two tax credit related “peaks” were at 418 thousand and 422 thousand, and sales are still below those levels.
Given the current low level of sales, and current market conditions (supply and demand), sales will probably continue to increase over the next few years. I don’t expect sales to increase to 2005 levels, but something close to 800,000 is possible once the number of distressed sales declines to more normal levels.
Here is an update to the distressing gap graph.
This “distressing gap” graph that shows existing home sales (left axis) and new home sales (right axis) through September. This graph starts in 1994, but the relationship has been fairly steady back to the ’60s.
Following the housing bubble and bust, the “distressing gap” appeared mostly because of distressed sales. The flood of distressed sales has kept existing home sales elevated, and depressed new home sales since builders haven’t been able to compete with the low prices of all the foreclosed properties.
I don’t expect much of an increase in existing home sales (distressed sales will slowly decline and be offset by more conventional sales). But I do expect this gap to close – mostly from an increase in new home sales.
Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different