New home inventories rise and sales fall in August
According to the U.S. Census Bureau and the Department of Housing and Urban Development, single-family new home inventories increased to 284k in August (seasonally adjusted). Absolute inventories are at the highest level since May 2009. August’s new home inventories were 43k (17.8%) above the prior-year level of 241k. New home inventories are closing in on longer run average inventory levels (~340k).
The growth in inventories in the last year (seasonally adjusted) has been driven by homes under construction (+24K) and homes not yet started (+15k), more so than by homes completed (+3k).
New home inventories increased slowly during the first 9 months of 2016, from 237k in January to 242k in September, but then jumped to 256k by December, an increase of 19k from January. In 2015, inventories rose 27k; from 207k in January to 234k in December. The last year of flat inventories was 2012, when the absolute inventory of new homes remained within a consistent range of 142k – 150k.
Seasonally adjusted new home inventories increased to 6.1 months of supply in August, from 5.7 months in July and 5.1 months in August 2016. Inventories have not been this high since August 2014. Sales of new single-family houses fell to 560k (seasonally adjusted annual rate), down 3.4% from revised prior month sales and down 1.2% from prior year. Full-year 2016 sales of 561k were up 12.0% from 501k in 2015. Year-to-date 2017 sales are up 7.5%
Full year 2015 new home sales were up 14.6% over 2014. For the full year 2014, new home sales only grew by 1.9% to 437k units. The months of supply figure remained below 5 months between February 2012 and June 2013, but was 5.0 or more from that point through the end of 2014 with only one exception. In 2015, eight months were at 5.0 or greater months of supply, including each of the last 7 months of the year. In 2016, only one month (July) was less than 5.0 and this year every month has seen 5 or more months of supply on the market. The average months of supply over the last 50 years is 6.1, so current new home inventory are at “normal” levels. For the 9-year period of 1997 through 2005, the inventory level averaged 4.1 months with relatively little volatility, despite the dot-com boom and subsequent recession, and we are well above that level today. The vertical bars in the graphs represent recessions.