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New Home Sales Slightly Below Expectations, but Up 10.7% MoM

Summary:
This morning's release of the October New Home Sales from the Census Bureau at 495,000 disappointed general expectations, and the previous month was revised downward by 21K. The MoM increase was 10.7%. The Investing.com forecast was for 500K. Here is the opening from the report: Sales of new single-family houses in October 2015 were at a seasonally adjusted annual rate of 495,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 10.7 percent (±17.7%)* above the revised September rate of 447,000 and is 4.9 percent (±17.6%)* above the October 2014 estimate of 472,000. [Full Report] For a longer-term perspective, here is a snapshot of the data series, which is produced in conjunction with the Department of Housing and Urban Development. The data since January 1963 is available in the St. Louis Fed's FRED repository here. Over this time frame we see the steady rise in new home sales following the 1990 recession and the acceleration in sales during the real estate bubble that peaked in 2005. The Population-Adjusted Reality Now let's examine the data with a simple population adjustment. The Census Bureau's mid-month population estimates show a 71% increase in the US population since 1963. Here is a chart of new home sales as a percent of the population.

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This morning's release of the October New Home Sales from the Census Bureau at 495,000 disappointed general expectations, and the previous month was revised downward by 21K. The MoM increase was 10.7%. The Investing.com forecast was for 500K.

Here is the opening from the report:

Sales of new single-family houses in October 2015 were at a seasonally adjusted annual rate of 495,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 10.7 percent (±17.7%)* above the revised September rate of 447,000 and is 4.9 percent (±17.6%)* above the October 2014 estimate of 472,000. [Full Report]

For a longer-term perspective, here is a snapshot of the data series, which is produced in conjunction with the Department of Housing and Urban Development. The data since January 1963 is available in the St. Louis Fed's FRED repository here.

New Home Sales Slightly Below Expectations, but Up 10.7% MoM

Over this time frame we see the steady rise in new home sales following the 1990 recession and the acceleration in sales during the real estate bubble that peaked in 2005.

The Population-Adjusted Reality

Now let's examine the data with a simple population adjustment. The Census Bureau's mid-month population estimates show a 71% increase in the US population since 1963. Here is a chart of new home sales as a percent of the population.

New Home Sales Slightly Below Expectations, but Up 10.7% MoM

New single-family home sales are about 16% below the 1963 start of this data series. The population-adjusted version is 51% below the first 1963 sales and at a level similar to the lows we saw during the double-dip recession in the early 1980s, a time when 30-year mortgage rates peaked above 18%. Today's 30-year rate is around 4%.


For additional perspectives on residential real estate, here is the complete list of our monthly updates:

Jill Mislinski
Jill has been working with Advisor Perspectives since 2012 and is currently their Research Director as part of Doug Short’s team. Her background is in mathematics and physics and she holds a Master of Science in Physical Science with a concentration in physics and astronomy from the University of Chicago.

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