New Home Sales

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses new home sales.

  • The figures for new home sales, contracts and not actual closings, released today were weak at first blush, but reflected core strength.
  • New home sales in December fell 7.3% from November to 369,000. However, the November figures were revised upward by 9.7%, while the October figure was revised upward as well.
  • Relative to last year, new home sales in December were 8.8% stronger and the median price was 13.9% higher.
  • While building has improved in recent quarters, inventories remain tight.  Increased demand drove the months supply below 5 in recent months and despite the down tick in sales, that figure was 4.9 in December, the 11th consecutive month below a supply of 5 months.
  • Slim supplies relative to demand will help to support stable price growth, but new sales are limited by supply as well, so expect this figure to remain muted in the near term until new construction can support more new contracts.

Ken Fears, Director, Regional Economics and Housing Finance

Ken Fears is the Manager of Regional Economics and Housing Finance Policy. He focuses on regional and local market trends found in the Local Market Reports and the Market Watch Reports . He also writes on developments in the mortgage industry and foreclosures.

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  1. A balanced market would have a housing supply between four and six months. A supply below five months of course affects sales. You can’t buy homes that are not available for sale. This does not necessarily mean that number of sales are truly down. If there were more inventory, I personally feel there would be more sales. I have to explain this same issue in my real estate appraisal form 1004 MC (Marketing Conditions) which is currently mandatory for all purchases and refinances. Here in Los Angeles, California where I’ve been a certified residential appraiser for over 28 years, we generally have less than a month’s supply. This makes it tough for real estate buyers and agents. It’s also tough for appraisers because we don’t have that many comparable sales or listings available to use in our reports. On top of this what is selling right now in my area are the less than prime homes. People with prime homes are holding on and refinancing, not selling. This makes it difficult to appraise their nicer homes for refinance when most of the sold comps are inferior. Because of government mandated USPAP guidelines, we are limited to which comps we may choose and how much we can deviate, i.e. +/- 15% size, within one mile radius, within six months… Hopefully as things improve the market will open up more.