New Home Sales And Prices: When The Numbers Don’t Add Up

The latest numbers for U.S. new home sales and new home prices are more than a bit puzzling. The latest seasonally adjusted numbers from Census Bureau pegged new home sales in November at a 464,000 annual rate. This comes at a time when average new home prices just hit an all-time high at $340,300.

If we are to believe the massaged data and those “seasonally adjusted” numbers, new home sales for September, October and November were well above the peak selling months of June July and August. Taking a 3-month average that would peg the seasonally adjusted annual rate for September through November a full 130,000 higher than June through August. If that sounds preposterous, it should.

Looking at home builder stocks and their performance this year, those Census numbers for new home sales look even more unbelievable. If new home sales were so great, you would expect those stocks to be shooting dramatically higher, but they aren’t.  Instead those stocks have been languishing, butting up against the wall of affordability at the same time that mortgage purchase applications have been falling. The latest quarterly data for home builders’ actual sales confirms that sales have been stagnating.  It’s also interesting to note that home builder stocks also popped higher when it was announced that new FHFA head Mel Watt would be delaying the GSE fee increases which are currently on the table. This is just another confirmation that ZIRP and central bank policy are keeping the housing market afloat.

The numbers for U.S. new home sales as reported by the Census just don’t add up. Contrary to the headline numbers reported, home sales have been much more sensitive to the interest rate rise and subsequent decrease in affordability than many in the housing industry would have you believe.  This fact is born out in the charts of several major home builders stocks.  I find it interesting that the government continues to report statistics which are detached from the facts on the ground, but this is current policy these days.  The central bank is in a desperate attempt to keep a lid on interest rates. They know that the real estate recovery is fragile, and they’re trying to keep home prices aloft to buy more time.

“Despite claims otherwise, central banks are giving top priority to interest rate stability, over that of other mandates they have been given explicitly, such as the health of the financial system, price stability, and full employment. This is further confirmation of the idea that central banks are desperate to keep asset prices aloft. For the ECB, the priority is to keep bond prices high to avoid exposing the insolvency of Eurobanks, and for the Fed, out of the need to keep the stock market high and keep goosing a not-very-impressive housing market recovery so as to keep the confidence fairy alive.”

Average New Home Prices Now At New Highs



New Home Sales & Recessions – Bouncing Off Historical Lows



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