After an upside surprise in April, economists expected a decline in new home sales in May. Instead, sales surged 12.2 percent. 
New home sales jumped again in May according to the Census Bureau’s New Residential Construction Report.
New Home Sales Key Points
- Sales of new single‐family houses in May 2023 were at a seasonally adjusted annual rate of 763,000.
- This is 12.2 percent (±12.8 percent) above the revised April rate of 680,000 and is 20.0 percent (±15.5 percent) above the May 2022 estimate of 636,000.
- The median sales price of new houses sold in May 2023 was $416,300. The average sales price was $487,300.
- The seasonally‐adjusted estimate of new houses for sale at the end of May was 428,000. This represents a supply of 6.7 months at the current sales rate.
Note the margins of error in these reported numbers. The data is constantly revised, recently to the downside but there was no major negative revision this month.
Despite the bounce in sales, the level of sales is about where it was in September of 1972.
For added perspective, unadjusted sales for May were 73,000. Seasonally adjusted, annualized, that translates to the reported 763,000.
New Homes For Sale By Stage of Construction
Homes For Sale Discussion
The Census Bureau reports 428,000 homes are “For Sale”. From that, the bureau measures “months’ supply”.
But of those 428,000 homes for sale, only 69,000 have been completed. 100,000 have not been started and might not be.
Month’s Supply
The Census Bureau reports 6.7 months of supply at the current sales rate. This is a bogus number because it includes 100,000 home for sale that have not even been started.
Housing Units Under Construction
There is a new-record 1.7 million homes under construction. Economists have been expecting declines in the price of rent as a result, but it hasn’t happened.
Core Inflation is Much Stickier Than the Fed Expected, Now What?
Upside Surprises
For discussion of rent and core inflation, please see Core Inflation is Much Stickier Than the Fed Expected, Now What?
The data reports today have surprised to the upside. Also see A Surge in Durable Goods Orders is Fueled by Motor Vehicles and Parts
Don’t be surprised if the Fed turns more hawkish.
I live in Central Florida, about 5 miles from downtown Orlando. From what I can tell talking to realtors, the area is still booming. Massive new residential subdivisions with single family homes and apartments are sprouting up all over a 5 county area. Where I live, homes are snatched up within 30 days of initial listing. In more desirable neighborhoods, smaller homes that were built in the 1940s, 1950s, and 1960s are being bought for their lots, torn down, and rebuilt with 3K+ sq. ft. houses.
The major developments are in outlying areas to which new expressways and town-centers are being built. These are massive with upwards of 4,000 homes. In the far future, the Mormon owned property, Deseret Ranch, has future plans to build a new city of over 250,000 people on some of their existing 300,000 acres between Orlando and Cape Canaveral.
what a great analysis. thanks for the very long term perspective. what a bizarre r/e market. i’ll need to contemplate and read again. seems to me the r/e market is trading like penny stocks, with such low volume.
Also to consider…
I have heard a lot about work-from-home trends (accelerated in the Covid pandemic) as part of the decline in office real estate occupancy — esp. in some key cities/states with urban flight. It seems that few are considering that the ‘-home’ part of ‘work-from-home’ is being underestimated…it is very likely the flip side of the office decline, a zero-sum game.
Even if one doesn’t need a new home in order to work from home, one might want to move into a bigger house with more room for home office(s). Maybe to a home in an area with better internet/wireless access. Maybe a more desirable living location, where one can walk the dog(s), enjoy the outdoors, etc., now that one does not need to be a close commute to the office anymore. Maybe more bedrooms to house the additional children of families that waited during Covid (or didn’t).
Even the gig worker trend and the early retirement trend (also accelerated by Covid), require a home base to live, and likely with different housing needs and wants than pre-Covid. Rents have risen, too, and other costs of living.
So despite the damper of high mortgage rates, there are plenty of factors in our society that still push housing churn. It might be bumpy, but everyone needs a place to live, and there are more people coming to the US every day than are leaving it. So residential housing and the mortgage market will probably remain fairly active.
Maybe Im mistaken….but these are signs of a loose money supply still. Which tells me that the rate of inflation is probably much higher than that which is reported by the BLS…. Dont they adjust many of these numbers to inflation (purchase price, wholsale prices, etc)? If inflation is understated, then many of these measures will be overstated….which makes sense based on what seems to REALLY be happening, and what is reported.
Yup, some CD’s in the fall to rollover. Some I bonds to roll over. 5.75% coming.
Tomorrow is Aïd el-Kébir. Hundreds of millions of sheep will have their throats cut at almost the same time.
And in a week it’s the Fourth of July and “hundreds of millions” of cattle will hit the grill. What’s your f**king point?
No point. Just seeing if you know anything about Muslim culture. By the way there are only 30 cattle in the US so no hundreds of millions of them hitting the grill.
And I’ve got a lamb in the sous vide right now…
lamb chops are my fav.
And mine. There was a place called George’s Greek in Long Beach, CA. I used to eat there often when I was in town. I asked the owner for the recipe and he gave it to me. I’ve been tweaking it to perfection.
Things have been weird for a while now…there is huge demand for air travel, cruise ships, and it’s peak summer driving season yet oil has been stagnant.
There is over building of housing yet prices do not fall. Consumption continues to go up despite trillions in credit card debt and student loan payments coming due.
Commercial real estate buildings are half empty but no continuous defaults except a few here and there.
On the one hand, all the tell-tale signs of a recession are there but on the other hand everyone’s partying like its 1999. The fed keeps trying to take away the punch bowl but somewhere magic juice flows in to keep the party going.
“The fed keeps trying to take away the punch bowl but somewhere magic juice flows in to keep the party going.”
Maybe some of that Inflation Reduction Act juice?