Key Highlights
- US Census Bureau reported new home sales +41.5% y/y and +20.6% year to date
- Mortgage Bankers Association indicated purchase application increased +19% y/y Thanksgiving week
New homebuilders have much to be thankful for this holiday season. New home sales soared upwards to +41.5% y/y and +20.6% year-to-date, according to the US Census Bureau.
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No wonder that the National Association of Home Builders (NAHB/ Wells Fargo) Housing Market Index (HNI) jumped 5 points in November to hit 90, its highest level in the history of this index. Builder confidence levels have hit consecutive all-time highs over the past three months.
With new home sales catapulting, it’s no surprise that new home monthly supply has and continues to decline. The Census Burea report said, “The seasonally adjusted estimate of new houses for sale at the end of October was 278,000, (the fewest since 2017). This represents a supply of 3.3 months at the current sales rate.”
This 3.3 month supply of new homes for sale is another reason builder confidence is at a record high. According to Logan Mohtashami writing for HousingWire, “… Anything below 4.3 months of supply indicates that builders will have the utmost confidence to build. Higher levels of inventory in the range of 4.4 to 6.4 months indicate slow and steady growth for housing starts, like what we saw in the previous expansion. If inventory breaks over 6.5 months, then the market has issues, and builders will likely stall on construction. This happened in 2018 when mortgage rates reached 4.75% to 5%.”
Mohtashami’s reference to interest rates is worth paying attention to. New home sales are particularly sensitive to higher mortgage rates. If/when/as the economy improves, mortgage interest rates will eventually increase and as they do, new home sales and demand for new homes will begin to moderate.
More good news from the Mortgage Bankers Association (MBA). Purchase applications increased +19% y/y this last week…down from the week before when purchase applications increased +26% y/y but still nothing to sneeze at. This last week represented the 27th consecutive week of y/y growth for purchase applications.
The median selling price for new single-family homes rose +2.5% compared to last year at this time to the tune of $330,600.
Thanks to the US Census Bureau, the Mortgage Bankers Association, BloombergNews and HousingWire.
Also read: How Some Homebuilders Coping with Impacts of Coronavirus, “Frenzy” in Vacation Towns’ Luxury Markets, Renovate-to-Rent Fueling Foreclosure Auctions & Rental Rates Exploding
