New home sales at 5-year high, inventory flatlines

New single-family home sales in the U.S. West rose 80 percent from September 2011 to September 2012, and new home sales have increased in the region, year over year, for eight months in a row. With seven months of sustained year over year growth, new home sales are experiencing some of the most sustained growth seen since 2004, with growth rates reaching a ten-year high.   According to today's New Home Sales report, released by the Census Bureau,there were 9,000 new home sales in the Western U.S. during September 2012. That's the same total as reported in both July and August 2012, and slightly down from April, May and june, all of which reported 10,000 new home sales in the region. 

The report, which monitors sales activity for newly constructed houses, reported that in the West, new home sales were up from September 2011's 5,000 new homes sold.  Nationwide, sales rose 29 percent, rising from 24,000 to 31,000 during the same period. 

The first graph shows monthly new home sales totals for each month since 2003. New home sales in the West were tied with 2008 at 9,000 for a five-year high during September. New home sales for September have not been higher since 2007. 

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 75 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 78 percent since the total peaked during June 2007, and the same total has fallen 75 percent in the US since the number of new homes for sale peaked in the US during August 2006. 

As we see signs of growth in new home sales, the number of new homes being offered for sale continues to decline, and is now at the lowest point recorded since the 1990s. This has led to continued declines in inventory. For a longer historical perspective, see here. 

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 near a ten-year low, and is at 20,000 homes, the lowest point reached since the early 1990s.  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. 

This report is just the latest report showing ongoing increases in home sales, while at the same time showing declines in inventory. In the short term, with continued monetary easing, demand for homes looks to continue as inventory will only slowly grow, contributing to ongoing price increases.