December 2017 New Home Sales

Sales of new homes fell in December 2017 according to the Census Bureau.  Signed contracts declined 9.3 percent in the period to 625,000 units on an annualized rate.  Additionally, November was downwardly revised to 689,000 units (originally 733,000).  However, even after the revision and slowdown, November and December 2017 were the best and fourth best months of sales respectively during the current 8.5 year economic expansion, and volume increased 14.1 percent compared to a year earlier.

Price proxies and inventories rose in the period.  The median-priced home set the buyer back $335,400, increasing about $500.  Meanwhile, the average price rose more substantially, moving to $398,900 from $383,600 in November.  Both measures of supply were higher as well.  An additional 11,000 units were added in the period for a total of 295,000 homes.  At the current pace of sales, this represents a 5.7 month supply, increasing from just 4.9 months in the prior period.

Despite the monthly setback, housing’s trend is improving along with America’s overall output.  Many areas of the economy (e.g., construction, finance, government employees, and real estate professionals) are directly impacted by a growing housing market, thus creating positive ripples throughout other portions of our nation when times are good for this segment.  Folks in these lines of work all have at least one thing in common: they consume.  And America runs on consumption.