“Sales of new single-family houses in April 2016 were at a seasonally adjusted annual rate of 619,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 16.6 percent above the revised March rate of 531,000 and is 23.8 percent above the April 2015 estimate of 500,000.”
We are beginning to see a real recovery in housing inventories with more new home being built, the one element that has been holding back more robust sales, as well as first-timers from entering the housing market.
“Rising home sales combined with tight inventory will translate into increased housing production as we move onward in 2016, especially as job creation continues and mortgage rates remain low,” said NAHB Chief Economist Robert Dietz.
We are also seeing record low mortgage default rates, another sign that more homeowners are free to either move or refinance their homes. Strong job creation and a seven-year U.S. economic recovery have helped home owners get in the best shape in years. The number of new foreclosures in the first quarter edged near the lowest level in 17 years, the New York Federal Reserve said Tuesday.
The same was true for other consumer debt. Repayments increased and just 5 percent of all outstanding household debt — student loans, credit cards, auto loans, mortgages, home equity lines of credit – was delinquent in early 2016. That’s the smallest share of delinquencies since 2007, shortly before the onset of the Great Recession.
Graph: Calculated Risk
The bottom line is that more new homes have to be built—almost doubled to 1 million per year in order to catch up with historical demand. Historically, the number of new and existing-home sales was a constant ratio of 6 to 1 existing-homes to new-home sales. That means at the current existing-home sales rate of 5.4 million homes, some 900,000 new homes need to be sold. And they have to be in the more affordable price ranges, which means closer to the current median new-home price of $321,100, or below.
Harlan Green © 2016
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