Plummeting New Home Sales

The Building Industry and Land Development Association (BILD) released the February numbers for new home sales today, and the results were not pretty. Yes, it was positive that sales of single-family houses climbed from 259 to 639 year-over-year; however, that number is still only 44% of the volume of sales from 2017. The real story from last month was the plummet in new condo sales. Condo sales dropped from 1,860 in 2018 to 772 last month. Worse, February’s result was only 28% the sales total of 2017. For the building industry, September’s support from the Federal government to first-time home buyers can not come quickly enough.

New homes by monthSource: BILD – Altus, Six Housing Sense

2019 new home sales started out with a glimmer of hope by surpassing the weak sales total of January 2018. Had this trend continued new sales volumes could have slowly returned closer to the five-year average. However, February’s sales fell 33% below the same month one year ago, and now set up a year that could perform even worse than 2018.

new condo sales by monthSource: BILD – Altus, Six Housing Sense

January’s new condo sales figure stopped a 14-month trend of year-over-year sales reductions. For the first month since October 2017, condo sales saw an annual improvement. Unfortunately, last month’s condo sales were not able to make it two months in a row of growth. In fact, this February marked the lowest sales for the month in recent history, and by a healthy margin. New condo prices may be up year-over-year; however, if these sales patterns continue, prices will almost certainly have to fall.

New home sales by yearSource: BILD – Altus, Six Housing Sense

Over the past five years, the sales from January and February made up between 11 to 17% of the total annual sales. Taking the average of these results (13.5%) we can forecast how the rest of the year will go for new build sales. Assuming the early 2019 results trend forward as the past five years have, just over 20,400 new homes will be sold this year. Sadly, for the industry, that total would mean 2019, just as 2018 did, would produce lowest annual sales total of the decade.

The new home sector is seeing falling single-family home prices, while year-over-year improvements in sales, and rising condo prices, though drastic reductions in sales. This is to say the sector is not on solid footing right now. The progressively weaker condo sales are pointing to price troubles ahead, just as single-family homes are experiencing now. If prices are to hold, new build sales will need to rebound in a hurry. Watching this market over the spring housing season will be very telling for what’s to come over for the rest of the year.

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