Looking good from here

Looking good from here

I have been reading how, over the past few months, new home sales have been having 20+% increases since last year and how the pace of new single family home sales is now at an annualized rate of about 464,000 yearly sales.  Woo hoo, great news!  However, I wanted to evaluate this current increase and sales pace historically.  Coupled with my favorite web browser, I was able to visit the census.gov/construction website and review new home sales over the last 50 years. 

Interesting data on this chart.  We all know that new home sales peaked in 2005 when people had nothing better to do with their money than to bid up the prices and sales pace of new homes to the tune of 1.283 million single family homes that year.  Almost three times the pace of 2013.  We also know that the years 2000 – 2002 reflected a more stabilized price and sales pace for new home sales.  During that three year period, new home sales increased from 877,000 to 908,000 to 973,000 single family homes.  Looking at the current 2013 yearly increase with this historical lens, it is somewhat refreshing to know that we still have about 100% to go just to get back to the last normal pace of new home sales. 

To put an even greater perspective on the current sales pace, before the recent downturn, you have to go back to 1981 and 1982 to see absorption levels below 500,000, when they were at 436,000 and 412,000 new home sales, respectively.  Before that, you have to look to the years 1966 – 1970 when sales hovered between 450,000 and 480,000 homes.  I guess the free love period did not translate to buying a new home to find your own room.  Even going all the way back to 1963, there were 560,000 new single family homes being sold.

Let’s look at the current sales pace another way.  Assume no homes are sold in the 10 least populated states and that all 464,000 new home sales are just spread among the remaining 40 states (Sorry Wyoming, Alaska, Montana, the Dakotas et al. I need to make a point).  That means each of these 40 states only averaged 11,600 new home sales per year.  Or 967 homes per month, or 32 homes per day.  In Florida, the Villages alone, the top selling community in the US, sold over 3,400 homes this year.  Obviously, there is room here for national growth.

The point is, as the housing recovery continues, do not get caught up in talk that the new home sales pace will slow as interest rates and home prices continue to rise.  Barring a new unforeseen economic meltdown, this puppy is just starting to rev back up again.  I am not saying we are going to get back to 1.283 million new home sales again anytime soon.  However, there is a long way to go before we even begin to reach what should be a return to normal levels of stabilization.

Until next time…

Keep kicking the dirt!

Jeff Gersh is President of Gersh Consulting Services, a real estate advisory firm, headquartered in Orlando, FL.  He may be reached at jsgersh@gmail.com or 407-468-9328