NEW Home Sales to Existing home sales is currently 14% (1 out of 7). NEW home sales are a key driver to US employment both for those directly involved in construction but also to the supply chain of components necessary to build a home. Sales of NEW homes continue to decrease, and months of inventory continue to rise.
New home prices tend to be ~10% higher than existing. As such, the NEW home market is mortgage rate sensitive. With the recent record run-up in mortgage rates, its impact on NEW home sales is going to be important.
Key historical time series national data is shown on the attached file including:
- Sales
- Prices
- Product sold Pre-construction, under construction, and complete
- Permits, Starts, and Completion
- Months of Inventory
Below is but one of the graphics on the attachment. The relationship between mortgage rates and NEW home permits, completions, sales, and months of inventory is shown attached.
Note the Months of Inventory. Sales have decreased at a faster pace while the pipeline of homes under construction continues toward completion. Demand has pulled back faster than supply (i.e. under construction) has been able to slow. With fewer homes being built, it will have future upward pressure on home prices.
New Homes Supply or Sale and New Home Starts
Both permit AND starts have pulled back. Completions continue as homes under construction are finished. Note the homes nearing completion are HALF of what they were in 2005/6. Nationally over a longer period, this will/could result in an under-supply situation which will result in upward pressure on the inventory of existing home prices.
Bill Knudson, Research Analyst Landco ARESC