New Home Sales and Prices Confirm Sales Bottom as Year-on-Year Price Decline Persists
– by a New Deal Democrat
The last of the monthly updates on new housing construction, new home sales, was reported this morning. And continued the theme from the other data (permits, starts, existing home sales); namely, the bottom in sales appears to have occurred while prices continue to fall.
First, on sales: New home sales increased 27,000 year-over-year to 683,000 (red in the chart below). But as I’ve said many times, this series is very noisy and heavily remade. 683,000 is exactly what last month’s report claimed for March (blue):
So, as usual, take this month’s earnings with a grain of salt.
However, the value of this series is that it is very often the first data series to reverse. We can see this when we compare the above monthly data with single-family permits (red):
Although single-family permits are almost all buzz and little noise, single-family home sales have peaked and fallen first globally since the pandemic.
By the way, buy-to-let mortgage applications have also trended largely away from the peak in mortgage rates last fall (via Yardeni.com):
Second, another long-standing mantra of mine is that prices (red in the chart below) follow sales (blue). Since prices are not seasonally adjusted, we need to compare on an annual basis:
Sales first peaked and then bottomed out. Prices peaked a year later and as of this morning’s first estimate had hit a new multi-year low, down -8.2% year-on-year.
Since the price data is also noisy, I’ve compared it below to the year-over-year change in the FHFA purchases-only index (blue):
Since the latest data is only up to February, when it will be updated next week, we should expect a further year-on-year decline.
Of course, as stated above, this is all predicated on mortgage rates not reaching new highs. As of yesterday, mortgage rates were just below 7%, just about 0.20% below their October 2022 highs:
If this renewed rate hike continues, we can expect another test of low home sales and construction in a few months.