Wednesday, May 23, 2012

New home inventory falls to new low, sales up slightly

New single-family home sales rose 12.5 percent from April 2011 to April 2012, but total sales remain near post-recession lows.  According to Tuesday's New Home Sales report, released by the Census Bureau,there were nine thousand new home sales in the Western U.S. during April 2012.

The report, which monitors sales activity for newly constructed houses, reported that in the West, new home sales were up from April 2011's 8,000 new homes sold.  Nationwide, sales rose 10 percent, rising from 30,000 to 33,000 during the same period.

At 9,000 new home sales during April, sales are up from March 2012's total of 7,000, but were down from April 2010's total of 10,000. This suggests a continued lack of robust demand for new homes.

The first graph shows monthly new home sales totals for each month since 2003:

For the West region:

The second graph shows that new home sales continue to be well below peak levels, although they have begun to slowly move up in recent months. 

New home sales peaked during the spring and summer of 2005 and have generally trended downward since. The number of new houses sold in the United States is down 74 percent since the peak of March 2005, and new home sales in the West have fallen 76 percent since sales peaked in the region during March 2004.

The third graph shows the declines in both US and regional totals in new homes for sale.

The number of new homes for sale has also fallen off considerably. The number of new houses for sale in the West has fallen 76 percent since the total peaked during June 2007, and the same total has fallen 74 percent in the US since the number of new homes for sale peaked in the US during August 2006.

With 32,000 new homes for sale in April, the number of new single-family homes for sale in the West remained near March's ten-year low of 31,000.

As a final note, we can also look to the new home inventory. In this case, we calculate inventory by subtracting the number of new home sales in a given month from the number of new homes for sale at the end of the previous month. In the final graph, we see that the inventory is now at a ten-year low of 22,000 homes and is at the lowest level reported in more than 12 years.  This is good news for owners seeking to sell homes since it suggests that fewer new homes are sitting and waiting to be sold, thus diminishing some of the inventory-driven downward pressure on prices. Inventory has also been down in existing home sales, as noted here.

Overall, this report shows that while new home sales are not declining, they are not showing growth either. Inventory is at very low levels, although median home price growth in existing homes may not be sufficient to spur a large amount of new single-family construction.