New Home Sales Blast Higher Despite Floundering Jobs

Mish

New home sales are above the 2020 pre-Covid high set in January.

As reported in the New Residential Sales report for June, sales of new single-family houses in June 2020 were at a seasonally adjusted annual rate of 776,000. 

The Great Recession recovery high was in January of 2020 at 774,000. 

Sales in June are 13.8 percent above the revised May rate of 682,000 and 6.9 percent above the June 2019 estimate of 726,000. 

Historical Perspective

New Homes Sold and For Sale July 2020 Report

Sale Price

The median sales price of new houses sold in June 2020 was $329,200. The average sales price was $384,700. 

Supply of New Houses 

Monthly Supply of Houses July 2020  Report

For Sale Inventory and Months’ Supply

The seasonally-adjusted estimate of new houses for sale at the end of June was 307,000. This represents a supply of  4.7 months at the current sales rate.

Builder Confidence

The red line in my first two charts, new homes for sale, is a measure of builder confidence.

New homes for sale peaked in January of 2019 at 637,000 units SAAR and has been trending lower ever since. It is now 307,000.

Builders are not as confident as in 2019 and that predates Covid. Builders seem reluctant to make the mistake they made in 2006-2008.

Jobs Picture

  1. Over 30 Million People About to Lose $600 in Unemployment Benefits
  2. Unemployment Claims Rise for the First Time in 4 Months
  3. More Than Half of Business Closures are Permanent

Even though home sales are doing well vs nearly everything else, the jobs picture is another matter.

The Fed has encouraged speculation in financial assets and succeeded, for now.

Mish

Comments (31)
No. 1-17
Tony Bennett
Tony Bennett

June will prove to be high water mark (or very close to it) for this cycle.

IA Hawkeye in SoCal
IA Hawkeye in SoCal

The solid, SOLID majority of those being affected by this economy are not the homeowner type. If a restaurant closes, many lose their jobs but the only homeowner type employee is the general manager/owner. I think housing will be just fine, especially out in the suburbs. Those who need to be worried are urban landlords, high density buildings, etc.

CautiousObserver
CautiousObserver

Record low home mortgage rates and possibly an oncoming wave of commercial real estate defaults. I am thinking home builders have to be extremely motivated to sell right about now.

C136
C136

Single family homes are doing much better than condos. Millennials are forming families in larger numbers which makes urban condo living less appealing if not outright unaffordable. Covid is just accelerating a trend that already had its own momentum. Retail exposure is one obvious red flag in CMBS and I suspect urban residential will be another in the years ahead. Landlords planning on flipping rental properties into condos will struggle.

In my ocean side area, June was an all time volume record. Now not much left for sale but lots of interested buyers.

Tony Bennett
Tony Bennett

"The Fed has encouraged speculation in financial assets and succeeded, for now."

...

Rent beginning to fall ... just wait till fiscal stimulus + forbearance + moratorium wanes...

"In June, the real rent index fell by approximately 0.1 percent. This is the first decline in the index since 2013 (Figure 1). The annual growth rate of the index fell to negative 1.4 percent, after posting three months of positive growth, at rates between 4 and 8 percent."

Tony Bennett
Tony Bennett

"Black Knight notes a slight increase in the number of forbearance plans in effect this week even as the number of forborne loans serviced for the GSEs (Fannie Mae and Freddie Mac) dropped sharply. The total number ticked up to 4.119 million, a 2,000-loan increase from the prior week. The total is 7.8 percent of the 53 million active mortgage loans and represents an unpaid principal of $890 billion."

anoop
anoop

If there is any drop in housing, private equity will be buying with both hands with their fed-provided wealth. So I don't see any problems for housing.

shamrock
shamrock

30 year mortgage rates are under 3%, lowest on record. I don't care what you say, that makes buying a house more affordable.

SteveVT
SteveVT

you've been muted on Trump. Maybe you see the left as threat to your well being now? I think that is wise counsel. Communism and Capitalism do not mix.

truthseeker
truthseeker

Hey Mish from my experience with you since the beginning of your blog, I’ve supported you since you have always been the only guy who “gets it” more or less yet from a secular point of view of our country’s economy and your ideas as to what’s going on in the rest of the world with regard to growth and debt and how it all affects America’s economy. Good grief things are going to get so much worse I’m afraid so I’ll check in later or tomorrow with some concepts I can see happening even now with my own grandson as it relates to housing.

BBQPaul
BBQPaul

I’d bet that smaller destination areas are seeing a surge as there is a major shift in work from home opportunities. Areas with smaller apartments and high rents I’d expect to be losers right now.

Rbm
Rbm

I heard an interview on the radio yesterday. From sac ca. Said rents dropping / havent been able to show properties due to covid.

KansasDog
KansasDog

Personally I wish they'd stop building the damn things and woman stopped getting pregnant.

Six000mileyear
Six000mileyear

I talked to my neighbor who is a real estate agent. She said the middle of the market is very active. It's people who want more space for work from home arrangements. The most popular upsize is from 3 to 5 bedrooms. Larger family rooms isolated from the main activity of the house is another at-home office solution. First time buyers lost their jobs, so those in starter houses are having a tougher time selling in order to upsize. Those in higher end houses are looking to downsize, so the lack of demand is hurting sales at the upper end of the market.

ReadyKilowatt
ReadyKilowatt

How many of these buyers are at that "golden age" when they aren't eligible for social security or cashing out their 401(k), but are furloughed and probably not going to come back to their former employer? I would imagine there are a lot of people in this situation who will take the opportunity to downsize, move to a low-cost area and ride out the next few years on savings and/or one income. Oh, and kick the kids out of the basement (although I've read a story or two about multigenerational families increasing over the last few months too).

truthseeker
truthseeker

There is a good friend of mine who has a home in Aspen who says there is a real estate frenzy going on there and 8 miles away in Snowmass, actually he didn’t mention Snowmass but I’m quiet sure it’s going on there as well, as people who can afford it scramble to get away from large cities fearing lack of safety and continued lawlessness. Many of these younger people are bringing their children and are offering whatever it takes to get a place, and plan to enroll them in school whenever that takes place. I bet the same thing is going on up in Deer Valley Utah where years ago I met your friend Lacy Hunt at the ski lodge at the base of the mountain.


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