January 26, 2012

U.S. New Home Sales: Down 7.3% In December Year-Over-Year

The seasonally adjusted annual pace of new single-family home sales in the U.S. fell to 307,000 in December, down 2.2 percent from a revised rate of 314,000 in November and 7.3 percent below the 331,000 pace recorded in December 2010.

Preliminary U.S. new home sales (versus pace) in December were estimated to be 21,000 (give or take 9 percent), down 1,000 from November and the slowest December on record since 1963. December sales peaked in 2005 with 87,000 new homes sold.

In the West, the pace of new home sales was down 29.1 percent year-over-year to 73,000 in December, up 9.0 percent versus the month before.

New Residential Sales: December 2011 [census.gov]
New Residential Sales Since 1963 [census.gov]
U.S. New Home Sales: Up 9.8% Year-Over-Year In November [SocketSite]

First Published: January 26, 2012 9:15 AM

Comments from "Plugged In" Readers

of course, builders are not building many new homes either, so there are fewer new homes for sale (I suspect), so fewer sales is not surprising.

Posted by: Big V at January 26, 2012 9:44 AM

But, of course, the reason they are not building new homes is that the demand to buy them is not there.

Posted by: A.T. at January 26, 2012 9:49 AM

29% (in the west) is a huge decrease. Anyone have any guesses as to what caused this?

The economy isn't quite as good as last year, but I don't see it being 29% worse. Usually when sales grind to a halt, prices are about to take a huge dive, but I see nothing in the economy that would cause such a shift.

Posted by: tipster at January 26, 2012 10:00 AM

And since new home construction has, in the past, been a leading indicator and driver of economic recover it's a sign of continued sub par growth for 2012, which will continue to pressure home prices.

The bright spot is that as the economy recovers all the individuals who are living at home or with roommates who would prefer there own space will start moving out and forming new households which would spur new construction, employ more individuals in the construction industry and add to the 'virtuous cycle'.

Posted by: badlydrawnbear at January 26, 2012 10:02 AM

My guess it's a lack of liquidity in loans. It's not that people don't want to buy - rather they can't meet the requirements of lenders.

Posted by: kg at January 26, 2012 10:16 AM

A good explanation of why new homes aren't being built:

http://www.calculatedriskblog.com/2012/01/2011-record-low-new-home-sales-and.html

Posted by: BernalDweller at January 26, 2012 10:47 AM

A bubble top foreclosure is hard to compete with. Plus new houses built in 2006 almost always included granite, very decent appliances and finishes, because a builder could throw them in and still make a very decent profit at 300K. Building a new home today with the same specs doesn't pan out at 180K, hence not much building happening.

A 2006 house is not very different from a 2012 one, and the 40% discount will help you live without that new house smell...

But we'll see the end of this tunnel. Land is much cheaper. There's less competition for raw materials. Workers are accepting less pay for construction jobs. Combine this with the inevitable end of the oversupply in the next few years and this will stabilize and bounce back to historical levels.

Posted by: lol at January 26, 2012 10:57 AM

"It's not that people don't want to buy - rather they can't meet the requirements of lenders."

so they can't afford it.

Posted by: * at January 26, 2012 11:16 AM

"so they can't afford it." - absolutely not. At least not by today's strict lending standards.

Posted by: kg at January 26, 2012 11:29 AM

Makes sense kg. This number almost exactly matches the realtor reported percentage of realtors reporting they had problems closing due to loan problems.

I said this before and I'll say it again: no market can survive unscathed with a 30% loss of customers.

If things have really tightened up that much, prices are about to take a big fall. But I just find it very hard to believe that banks are qualifying 30% fewer people. Maybe it's also tougher appraisals. I assume even a new home has to appraise, but I thought almost all builders have a lender that they have a relationship with and it would be difficult to believe that the builders would try to price above the appraisal.

Nevertheless, the good news is that the holders of land are finally throwing in the towel and dumping it at firesale prices. This means the builders will be able to drop their prices dramatically and compete with the foreclosures. Calpers just unloaded a LOT of land. They understand the real estate market isn't coming back for a very long time, and that the prices would just continue to sink and finally dumped it.

That will enable builders to buy it cheaper, and price new homes under what foreclosures are selling for. So I suppose the market is going to heal one way or the other.

http://www.bloomberg.com/news/2012-01-18/calpers-to-sell-one-fifth-of-its-residential-land-portfolio-1-.html

Posted by: tipster at January 26, 2012 11:31 AM

Kind of amazing, if you think about it, that in the entire United States, with a population of close to 300,000,000 people, only 21,000 bought new homes last month. That's 0.007% of the population.

Posted by: Jimmy (No Longer Bitter) at January 26, 2012 11:53 AM

Reminds me of the joke with the little kid selling lemonade for $100 a glass. An amused passerby asks him how many glasses he thinks he's going to sell at that price and he says "All I need to sell is one!"

21,000 at the current prices will look huge in a few years, like it did in Japan. You'll wonder where they found 21,000 people that stupid.

Posted by: tipster at January 26, 2012 2:31 PM

oh give it a rest. Japan is nothing like the United States in so many ways. People have painstakingly laid out precisely why in threads on here that you've participated in, and were shown to have inferior knowledge in. Many times.

Posted by: [anon.ed] at January 26, 2012 3:46 PM

I am surprised at this very low number of new homes, even for the good years of the mid-2000s.
After all the population in the US is almost double of the 1960s and yet we are producing fewer homes.

A bit of math:
The US has 114,000,000 households
Each and every one needs a home. I am not counting vacation homes or empty ones.

Depending on how long a home can last, either 40 years or 60 years or 100 years, we should be producing more than 1M homes a year to renew the existing pool of homes.

Which begs the question "what the heck is going on"? Are people making do and postponing the day they'll have to rebuild? Are we renovating more than rebuilding?

In any case, I think we'll see very decent construction/renovation employment in the next 30-50 years.
This looks like one of the many postponed work that will have to be addressed one day, along with bridges, power grid, roads, dams, etc...

Posted by: lol at January 26, 2012 4:02 PM

lol, I think this refers only to "new to industry" construction: homes that did not exist previously rather than rebuilds or renovations of existing places. Like a corporate builder throwing up a subdivision of identical, mauve 3/2s in some exurb. And it only covers SFRs, so essentially a meaningless stat for SF and the core bay area, IMO.

Posted by: Legacy Dude at January 26, 2012 5:00 PM

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