New Home Sales rose by 4.4% in November from October, to a total of about 377,000. Relative to a year ago, sales are up a good 15.3%. This increase in sales is very welcome and adds to the signs of a broadening housing market recovery.
There was, however, a downward revision to the October numbers of 7,000 from a total of about 368,000. The November level also somewhat lagged the expected rate of 379,000. Regardless of these changes, the overall trend is still improving.
Also median sale price trended up clocking a gain of 3.7% sequentially and 14.9% year over year.
Results by Region
Regional trends and numbers were very mixed. The Northeast, by far the smallest of the four U.S. regions in terms of new home sales, portrayed a definite improvement, with sales up 12.5% on the month and up 69.0% from a year ago. In November 2012 the region accounted for 7.2% of all new homes sold, up from 6.6% in October.
In the Midwest sales declined 12.5% sequentially and were also down 5.8% on a year over year basis. In the West, sales were down by 17.8% since last month but were up 13.7% since last year. The South, by far the largest of the four regions (57.8% of total sales in November), saw an increase of 21.1% for the month and 17.2% from last year.
New home sales have only exceeded the 400,000 level three times since September 2008 when the financial markets collapsed. The last was in April 2010, when sales surged by a tax credit for first-time homebuyers.
With reference to the peak of the housing bubble in July 2005 (new home sales of 1.389 million), new home sales are still down substantially by 72.9%, but still improving. Overall the report looks positive and new home sales are significant as they have historically led the economy out of recession since each new home sold represents a lot of economic activity.
Not only are high new home sales good for the big homebuilders like D.R. Horton Inc. (DHI - Analyst Report), but also for all the companies that make the products and supplies that go into making a new house. There is Berkshire Hathaway Inc. (BRK.B - Analyst Report) for bricks, roofing materials and insulation, Masco Corp. (MAS - Analyst Report) for plumbing fixtures and cabinets and USG Corp. (USG - Snapshot Report) for wallboard. The range also includes PPG Industries Inc. (PPG - Analyst Report) for glass and paint to Plum Creek Timber Co. Inc. (PCL - Analyst Report) for lumber.
It is of significance that all of the housing related data released during the month buttressed the housing recovery (though expansion remains a still far proposition), after suffering a huge breakdown in 2006. Permit issuance, an indicator of future building activity, rose 3.6% to a seasonally adjusted, annual rate of 899,000 units in November. Though housing starts slid 3.0%, it should be viewed as a readjustment to more normal levels of production following more than expected growth in the month of September and October.
National Association of Home Builders/Wells Fargo Housing Market Index (HMI), which reflects builder confidence in the market for newly built, single-family homes, posted a solid, 26 point gain year-over-year to 47 for December. On a sequential basis the index was up by 2 points. This marked the eighth consecutive monthly gain in the confidence gauge and brings it to its highest point since May 2006, when the index stood at 46. While the inventory of existing homes for sale narrowed down to 4.8 months, down from a 7-month supply last November, sales of existing homes rose 5.9 % to 5.04 million annual level.
With housing hopefully back on track, we believe it will be one of the sectors to give a much required push to jump-start the economy. It is also expected to generate jobs for the twenty-somethings so they can move out of their parents’ house creating more demand for new homes and thus get the economy moving again.