New home sales reached a six-month high in March, beating expectations. According to the Census Bureau, new home sales were at a seasonally adjusted annual rate of 724,000 last month, higher than the 684,000 forecast. This represents a 7.4% increase from February’s downwardly revised rate of 674,000 and a 6.0% rise from one year ago.
For a long-term perspective, here is a snapshot of the series beginning in 1963. We’ve included a six-month moving average to highlight the trend in this highly volatile series.
For a closer look, the next chart shows new home sales since 1990. Over this time frame, we see the steady rise in new home sales following the early-90s recession and the acceleration in sales during the real estate bubble that peaked in 2005. Starting in 2011, there was a similar rise in new home sales that peaked near the end of 2020 and retracted for about two years. New home sales have shown mild growth since the start of 2023.
New Home Sales: The Population-Adjusted Reality
Simply looking at raw new home sales figures can be misleading, as a growing population naturally suggests a higher number of sales. To gain a clearer picture of housing market strength relative to population growth, we need to normalize the data with a simple population adjustment. This adjustment—expressing new home sales as a percentage of the population—allows us to see the proportion of the population actively purchasing new homes, effectively accounting for the increase in potential buyers. This reveals whether housing demand is truly keeping pace with population growth.
The Census Bureau’s mid-month population estimates show a 81.7% increase in the U.S. population since 1963. Here is a chart of new home sales as a percentage of the population.
This adjusted data reveals key trends. A rising percentage indicates a healthy market with increased demand relative to population, while a declining percentage suggests a weakening market and reduced demand. New home sales as a percentage of the population peaked at 0.47% in July 2005, showing strong demand, and bottomed at 0.09% in February 2011, reflecting a severe downturn.
New single-family home sales are 22.5% above the 1963 start of this data series. However, the population-adjusted version is 32.6% below the first 1963 sales.
The 30-Year Fixed Rate Mortgage
The latest Freddie Mac Weekly Primary Mortgage Market Survey put the 30-year fixed rate at 6.83%. Here is a long look back of the 30-year fixed-rate mortgage average, which began in April of 1971.
New Home Sales: Median Price
The median home price is now at $403,00. This represents a 1.9% decrease from the previous month and a 7.5% decrease from one year ago. However, after adjusting for inflation, the monthly change is at a 2.1% decline while the annual change is at a 9.7% decline.
This next chart shows the inflation-adjusted median sales price of new homes since 1963, using the consumer price index for all urban consumers (CPI-U) for the inflation adjustment. We’ve included a six-month moving average to give us a clearer sense of the trend.
ETFs associated with residential real-estate include: iShares Residential and Multisector Real Estate ETF (REZ ).
ETFs associated with home builders include: Invesco Dynamic Building & Construction ETF (PKB ), iShares U.S. Home Construction ETF (ITB ) and SPDR S&P Homebuilders ETF (XHB ).
For additional perspectives on residential real estate, here is the complete list of our monthly updates:
- S&P/Case-Shiller Home Price Index
- FHFA House Price Index
- NAHB Housing Market Index
- “Existing Home Sales”http://advisorperspectives.com/dshort/updates/Existing-Home-Sales.php
- New Residential Housing Starts
- New Residential Building Permits
- Pending Home Sales
Originally published at Advisor Perspectives
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