CoreLogics’ chief economist, Dr. Frank Northaft, expects new home sales to increase nationally by +3% in 2019 despite increased land acquisition and development costs, a shortage in skilled labor and increased sales prices. His forecast builds upon the +2% increase in new home sales in 2018 compared with 2017.
How can this optimism concerning new home sales make sense in light of housing markets’ overall downturn? Northaft points specifically to rising household income growth as the vehicle for offsetting rising prices for new homes.
Looking at where the number of new home sales increased during 2018, Northaft points to the South and West. Each top four metro averaged +1,500 new home sales/month. Nudging demand and new home sales numbers upward in each of these four metros were rapid job growth in excess of the national average and increased in-migration for those jobs from other parts of the country. Take a look:
- Houston – +3.7% job growth
- Dallas – +2.6% job growth
- Atlanta – +2.1% job growth
- Phoenix – +4.2% job growth
Urban areas in the South and West are also experiencing the largest percentage growth figures for new-home demand. These urban areas, however, are not the largest urban areas…they are the fastest growing. They also tend to have good affordability, job growth and favorable, warm weather.
Take a look:
- Lafayette LS – +40% increase in new home sales with a median home price of $251,000
- Ocala FL – +40% increase in new home sales with a median home price of $224,000
- The national median price for a new home is $320,000.
- All the urban areas listed below had +20% – 30% increase in new home sales in 2018 compared to 2017
- Wilmington DE
- Lakeland FL
- Atlanta GA
- San Diego CA
- Tacoma WA
If Dr. Northaft’s expectations for new home sales in 2019 ring true, it would place the national numbers for new home sales at its highest level since 2007.
Northaft foresees that the South and West will again lead the nation in new home sales as they did in 2018 and that Houston and Dallas will again led the metros that top new home sales during 2019.