New home sales were up 10.6 percent in July, and an amazing 19.8 percent factoring out a big upward revision. What will this do to GDP estimates?
The Census Bureau’s New Home Sales Report shows a surge in sales for July with a huge positive revision to June.
New Home Sales Key Points
- New Home Sales Sales of new single-family houses in July 2024 were at a seasonally adjusted annual rate of 739,000.
- This is 10.6 percent (±16.5 percent) above the revised June rate of 668,000 and is 5.6 percent (±21.3 percent) above the July 2023 estimate of 700,000.
Note the astonishing margins of error in this report.
The revised June rate was 668,000 up from 617,000. From the previous report, sales are up ((739,000 – 617,000) / 617,000) * 100 = 19.8 percent.
I doubt that sticks, but assume it does. How much would that add to 2024 Q3 GDP? Ponder that, and I will discuss below.
Median and Average New Home Sales Price
If you are a homeowner and wish to thank someone for the above chart, including property taxes, insurance, maintenance, etc., please thank the Fed.
Sales Prices
- The median sales price of new houses sold in July 2024 was $429,800.
- The average sales price was $514,800.
New Homes For Sale By Stage of Construction
For Sale Inventory and Months’ Supply
- The seasonally-adjusted estimate of new houses for sale at the end of July was 462,000.
- This represents a supply of 7.5 months at the current sales rate.
Those numbers are from the Census Department. They are bogus.
The department counts homes that have not been started and may not be started for months or even years as homes for sale.
Of the allegedly 467,000 homes for sale, only 102,000 are complete. 100,000 have not even been started. 362,000 are started or completed.
Supply of Homes
From a fictious number of new homes for sale, we can calculate a fictious supply of new homes at 7.5 months.
Mish Headlines Three Prior Months
For starters, anyone who has any faith in today’s report, shouldn’t. But’s let’s do some what if calculations assuming they are.
Impact on GDP
The numbers look huge but that is the result of annualizing sales.
The BLS revised the June NSA new home sales numbers for May to June from 53,000 to 58,000. Today we are at 64,000. I failed to capture the April to May NSA revision but let’s assume the total increase is ~14,000 NSA.
14,000 homes * $514,800 average price = $7.21 billion. But that is spread out over 7-12 months. Much of the value added happens towards the end, especially completion.
If we divide $7.21 billion by four, the impact to GDP will be $1.8 billion.
However, I did note seasonally adjusted completions fell from 96,000 to 93,000 in May and from 102,000 to 99,000 in June. They are now back up to 102,000 in July.
A Big Nothing?
Since completions went nowhere, I am not convinced there is any positive impact from this report, as remarkable as that may seem.
In the spirit of being positive, I will take a stab at +0.05 percentage points contribution to residential construction in the GDPNow forecast on Monday.
I have never tried this calculation before, so take that under consideration.
Also, much depends on what the model expects. If the model expected more completions we could easily see a decline. And if the model expected less we could see a bigger jump, perhaps to 0.20 percentage points.
A big part of the problem here is figuring out what the model expects. My bottom line assumption is that it all adds up to barely anything.
No Impact on Recession Call
Given my projections, this does nothing to my recession forecast.
August 20: Improving the McKelvey Recession Indicator, No False Negative or Positive Signals
August 22: A Breakdown, by Sector, of the Negative 818,000 BLS Job Revisions
It’s important to note my above call pertains only to the contribution to residential construction.
I have no idea, literally none, what the -818,000 negative job revision will do to GDPNow.
According to NAHB, 2.9 full time jobs created for every house built. July’s bump is worth upwards of 350k jobs on an annual run rate. August sales are gonna be fire, adding that many jobs or more. There goes your recession.
-Jeremy
Some of those jobs will be eliminate, waiting for Kamala’s 3,000,000 housing units. If materialized and when our national industries will be completed demand for highly skilled workers and skilled workers will exceed supply.
By that math, we should be in Great Depression 2.0 territory by now because home sales have been slipping for a very long time and are now at 1995 levels despite 70 million or so more Americans present now versus then. But, let me guess, this is yet another one of those economic pendulums that only swings in one direction?
Kamala Harris plans to build 3,000,000 housing units. If materialized construction will exceed 2006 peak. Meanwhile home builders will be cautious, preparing for the unknown. The banks will force them to liquidate inventory and cut cost. Completed and available for sale will decline. This industry will slowdown, be on hold, waiting for Kamala’s takeover.
The GDP is a mirage. If it takes $100K of lumber, $250K of land, and $250K of labor to build a house that sells for $650K; then the GDP will be $100+$250+$250+$650 = $1250K. The input costs were only $600K, so the GDP really should have been $600K.
The net income or credit (based on given info) is $600K (to the suppliers and labor) and $50K to the contractor/developer (subtract $600K costs from $650K from the home buyer), so I agree GDP should account for $650K
GDP is a lame number to hang your hat on. building bombs with gov mouse click currency, and blowing up poor people around the globe is really not too productive. ignore GDP
How can anyone know if these numbers are real?
Obviously, interest rates aren’t too high for home buyers!
Depends on what the actual number ends up being between -5.9% YOY and + 27.1% YOY. That’s some confidence interval.
They were intending, all along, to lower. That is WHAT they do! That is all that they HAVE to do. Fiddling with rates is their crime!
After Covid and then Fed interest rate restrictions causing problems with purchase power, pent up demand is Large.
People still afraid of getting shut out and being stuck in Rental market. Do anything they can to become a homeowner.
Going to be hard to build enough homes when all those lost years of production get factored into supply.
Fed has managed to engineer a Housing shortage.
It means we’re not in a recession, the Fed is about to cut rates, the labor market may not deteriorate nearly as much or as rapidly as the Fed thinks it will, home sales will push higher throughout the rest of the year (seasonally adjusted) and the Fed runs the risk of having egg on its face when inflation rebounds starting sometime in the next 6 months.
Again, approaching $2T in deficit spending tends to reduce recessionary inertia.
People with kids in school tend to move in the summer. No shock here.
Housing is a giant money laundering operation. If the governemnt decided to seize housing bought with black money, there would suddenly be a huge supply of housing.
Start with not allowing home purchases unless you are a citizen. Any citizen caught fronting for a foreign national to buy houses get jail time. Such owners have 6-12 months to negotiate a sale of any existing properties they now (illegally) hold.
Also, forbid the purchase of homes by corporations for rent or resale.
The corporations benefit from having interest rates centrally managed. End the Fed.
Invitation Homes comes to mind first, then Blackstone.
What would all the snowbirds from Canada do?
Its one thing to try and crack down on homes bought with drug money or Chinese money but it’s another to stop lawful purchases by Canadians or Europeans etc.
There’s no Canadian or European or Russian or whatever drug dealers and money launderers?
And I thought it was all “doom and gloom” in the housing market…………….
Clearly no need to lower rates but here we are
. . . about 70 something days away from the election. Now even the Fed has jumped on the election interference train like the MSM, big tech, polling, BLS, etc.
That is so un-American.
Sarc.