New Home Sales Rose 26% From A Year Ago

  • New home sales surged in April and they are selling quickly.  The only problem is we are not yet building enough to fully satisfy the demand.
  • Specifically, new home sales rose 26 percent from one year ago in April to 517,000 annualized pace – which would be the third highest monthly activity in eight years.  On average it took 4 months to find a buyer.  The median price was $297,300, which is 8.3 percent above last year’s price.
  • The gap between new home price and existing home price still remains very wide.  It implies that existing homes provide a relatively better bargain in relation to newly constructed homes.
  • Even though new home sales are rising strongly in percentage terms, they are only at about half the activity as during the bubble years nearly a decade ago.  This implies, first, that today’s strong activity is not likely to be a bubble.  Second, there is more room to grow.
  • The median number of months to find a buyer of new homes remains near historic lows.  In April, it took 4 months.  Given the low supply of both existing and new home inventory, as evidenced by low months supply of inventory, there is zero concern over any over production.
  • For the year as a whole, new home sales are projected to rise by about 30 percent in 2015 and then another 20 to 25 percent in 2016.  It’s a good time to be a homebuilder. If only the banks would make more construction loans or, depending upon your point of view, if there were less financial regulations to permit banks to make more construction loans.
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