2 minute readToday’s new homes sales The topline reading here is this: Here’s Jay McKenzie’s comments on the data: It’s important to note that consumer search for new homes online in the first quarter of 2021 was the highest in the many years we have calculated the Index. The Year-over-Year comparison is based on that high-water mark, which makes the trend vs. last year more pronounced. As noted in a prior Index, the normal seasonality we see each year – absent in 2021 – has also returned. Given the events of the last 25 days, it’s not surprising that the volume of consumer search for newly built homes online is down. There are clearly many factors at play – including the Russian invasion of Ukraine, the widening repercussions of global sanctions on Russia as the world’s 11th largest economy, further supply chain disruption, uncertainty over supplies of oil and grain, continuing gains in home prices driven in great part by labor, land and material costs and the Fed’s clear resolve to tame inflation. Given the factors above – each significant in isolation, but magnified in total impact – it would be more remarkable if search volume was not down. As much as search volume trends may serve as a proxy for near-term purchase plans, the benchmark is has sensitivities to events that may be head-fakes in one direction or another. Areas to watch on the new home sales front include, primarily the months’ supply benchmark – currently higher than “normal” at 6.3 months – and how that impacts tactical price adjustments like discounts, upgrade incentives, and other inducements builders might start activating to keep the absorption pace in each new community at tolerable levels. NAHB chief economist Robert Dietz, per U.S. Census break-outs, charts new home inventory in three separate sub-buckets: In the February NHS release, of 407,000 homes of the total inventory of new for-sale homes – combining the three stages bulleted above – 35,000 (8.6%) are ready-to-occupy spec homes, and 106,000 (26%) are for-sale but not started. The balance – 266,000 (56.4%) – are new homes still under construction. As Bill McBride notes in Calculated Risk: The inventory of homes under construction at 266 thousand is the highest since 2007. The inventory of homes not started is at a record 106 thousand. Will demand slow? BDX trends show slackening new home search volume, but the time framing of the slippage may recover after a temporary hiccup following the events of February 24, or may flatten and stabilize for the near feature, or may trend downward. As for the strength of the pulse of demand, builders will be watching closely their absorptions per community per week and month benchmarks, their cancelation rates, their competitors price incentive tactics, and the broad dynamic backdrop of economic conditions as they navigate through multiple crises, but with a really strong demographic underpinning.
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New Home Search Trends Dip As Market Digests Prices And Crises
March 23, 2022, 5:07pm
