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
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
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
- Over 30 Million People About to Lose $600 in Unemployment Benefits
- Unemployment Claims Rise for the First Time in 4 Months
- 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
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).
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.
Personally I wish they’d stop building the damn things and woman stopped getting pregnant.
I heard an interview on the radio yesterday. From sac ca. Said rents dropping / havent been able to show properties due to covid.
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.
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.
Neither leads to optimal happiness. Both need each other as feedback mechanisms to prevent the worst of each from happening. The challenge is to design such a system.
New Home Sales Blast Higher As Nattering Nabobs of Negativism Are Wrong, Once Again!
71% of Millenials worry they may never afford home ownership https://propertyindustryeye.com/71-of-millenials-worry-they-may-never-afford-home-ownership-research/
They are the renters, and revenue source for the buyers.
Well, if people are fleeing the cities that will open up a lot of potential real estate that they were priced out of last year.
30 year mortgage rates are under 3%, lowest on record. I don’t care what you say, that makes buying a house more affordable.
It will be under 2.5% soon.
It would, if it wasn’t for the leech army being handed enough funds for a million mortgages each, at effectively no interest rate at all.
And it also would, if we lived in something resembling a free country, such that supply could respond to increased demand. But we don’t.
After all, Neither The White House, nor The Statue of Liberty get any more affordable for most people, just because The Fed hands so much money to its favored leeches, than some of them have little choice but to lend some out.
So you are saying that being homeless is a lifestyle choice.
Ok.
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.
Eventually we will inhabit a country full of grand structures that none of us are allowed to be in.
More like little shacks priced as if they were grand structures. Rank idiots, which are the only ones enriched by debasement theft, lack the competence to build anything grand.
“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.”
“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.”
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.
“Millennials are forming families in larger numbers”
Hmmm.
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.
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.
I am 45 minutes north of Tampa where a house sells for $250k that would be $700k in Oregon and would not even dare think how much in Cali. The riots and Covid have people screaming for Uhauls to get out of the city, yet they need to be within commute distance for when their jobs restart if they have not already. According to Zillow my house has appreciated 4% since May, and I suspect that is low, it also says comps in the zip code are going for 219 and I can tell you looking on the ground rather than the net they are more like 300.
So those areas outside city cores yet within commute distance are getting very hot RE action.
I can’t stand that argument. ALL jobs are connected. If the waitress loses her job, then how many tech gadgets will she be buying versus when she was employed? How many app subscriptions might he/she have to cancel? Fewer shoes, fewer clothes purchased. How many movies will she go see? Then there’s the HUGE issue of the rent she might miss, making life tough for her (and all) landlords, which in turn makes ALL structures less appealing to own. It’s all connected and all forms of unemployment find their way into housing.
June will prove to be high water mark (or very close to it) for this cycle.