New Home sales versus Existing Home sales...

[Kurt_and_Hunter]

We now have two divergent measures of home sales. Traditionally new home sales and existing home sales move more-or-less together as an indication of the demand for houses in general.

But now they measure two different things.

Both types of sale remove a home from inventory so that's a good thing. Selling is better than not selling.

But when it was announced that existing home sales jumped 22% in February nobody expected a comparable move in new homes because existing home sales include foreclosures and short-sales. Distressed sales accounted for a little over half of all existing home sales.

Many excellent charts here, but the URLs have under-scores and thus cannot be directly linked on DU.

Well worth the click, though:

http://www.calculatedriskblog.com/2009/03/new-home-sales-just-above-record-low.html

[Phoebe Loosinhouse]

1. I believe that there is some builder inventory in the distress category

especially as more and more builders go our of business.

[Kurt_and_Hunter]

2. I am sure such sales exist. but

I am sure such sales exist. but since February existing was up 22% and new was up 3% it seems safe to assume that distressed new home sales are a much smaller factor.

Which makes sense. Two things happened last fall: unemployment started expanding big and new home starts went off a cliff. So the disparity we see makes sense.

Bad economy forcing existing homes onto the market. New home inventory declining as a result of fewer starts.

[denem]

3. Feb & Mar - New home sales rose every year

for the last six years, notwithstanding the downward trend since 05. This seasonal pattern seems counter intuitive to me, at least for the northern states. Is there much building going on in Dec and Jan?

[rufus dog]

4. Wouldn't those numbers reflect when the sell closed?

So a house bought in summer/early fall would close in November/December?

Just a theory, grew up in AZ and live in SoCal so building is year round, but wouldn't you frame as many houses in summer then finish off the inside during the winter months?

[Kurt_and_Hunter]

5. Probably pent-up demand developed during the Nov-Jan lull

You are right that it looks odd, but if the charts were July-June instead of Jan-Dec it might appear more sensible.

I guess people don't buy houses during the Christmas season then get an early jump on the spring sales.

:shrug:

[karynnj]

6. this is a very well written explanation - thanks for the link

I do see one possible glimmer of hope - other than that the number of sales is very very marginally up. The last chart showing the supply of new homes is interesting. It shows that after a very significantly above historical levels peak, the combination of starts falling off a cliff and the anemic sales over the last year - the level is coming back down to the historical inventory levels.

If the economy rebounds at all, this could lead to these homes being sold and construction starting again.

[Kurt_and_Hunter]

9. You're welcome, and you're right about inventory (though it won't be reflected in price at first)

We have the number of sales and the prices paid.

It is expected that sales will go up first while prices continue to decline for a while.

Just one of those things, like how unemployment keeps going up for a while after a recession bottoms.

But either way, reducing inventories is the necessary first step.

I hope the builders can be kept in depressed mode for a while longer because the bad economy will continue to force a lot of existing homes onto the market going forward.

(Not just foreclosures, either. There will be a glut of people who have been waiting to sell because the market was so down. The first glimmer of hope will release a lot of new supply.)

[karynnj]

10. Interesting comments

I agree with you on the likelihood of there being a glut of people waiting. On a bike ride around the lake community I live in, I was surprised that there were far fewer sales signs than I had seen in the past. I would guess this is because many people are postponing sales. (In this community with good schools and high property taxes, in addition to people moving in and out of the area, there is a natural wave of empty nesters selling and young families buying. I suspect that the latter might be what has diminished.)

As to hoping the builders are still in depressed mode, it is interesting that what helps one part of the economy hurts another. Builders building create job - but, if they aren't building some buyers will purchase an existing home, which will help the housing market.

[Kurt_and_Hunter]

11. Yup, the labor vs. capital thing gets complicated when the workers owns a big asset

Many people in the home building trade own homes so they're in the middle.

[progressivebydesign]

7. Many foreclosures ARE new homes, though.. in fact it's a major part of the foreclosures.

There are so many homes that were investments, and were built, but never occupied. Existing sales does include those as well, but you have to factor in how many new homes sit in foreclosure as well. Actually the short sale and foreclosure numbers are skewed by investors, flippers, and builders.

I tell you what, on my street there are two homes for sale, Neither are short sales or foreclosures. One just closed escrow, and the other has seen so many showings and traffic in the past month -- moreso than I've ever seen. My Realtor friends have told me that they've been busy and not just with foreclosures (we don't have very many in this area other than some new developments.) Also, my Realtor showed me the figures and he did exactly the same volume and dollar biz of the year before... and it wasn't that far off from previous years.

I honestly don't care what type of sales are happening, I'm grateful to see people buying homes again. It's a good thing. It stabilizes neighborhoods and families.

[Kurt_and_Hunter]

8. I may be wrong about this, but...

I may be wrong about this, but I would assume that if you buy a home in a new development then have to bail out on it it would be an existing home sale even if it was never occupied.

(Because it is not the first time the property was sold)