Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update discusses new home sales.
- New home sales fell a notch in January, but the figures for the last two months are the highest in 12 months. The latest newly constructed home sales of 321,000 is comfortably above the cyclical low point during the summer of 2011.
- During the boom years, 1.3 million newly constructed homes were sold. In more normal years, about 800,000 to 900,000 are sold. Therefore, the current pace, though a slight recovery from the recent past, still has quite a long way to go.
- A big reason for low new sales numbers is that builders have not been building. Even with many empty lots sitting around, homebuilders have had problems with obtaining construction loans. But whatever is being built is getting sold; the inventory of newly constructed homes is at a 50-year low.
- In data definition terms, new home sales measures contract signings. There is no official data on new home sales that have closed. By contrast, existing home sales released by NAR measures closed transactions. NAR has a separate indicator called pending sales, which measures contract activity, which in the current environment does not mean an automatic settlement after few months. This will be released on Monday, February 27.