Solid New Home Sales Data Bodes Well For Homebuilder Funds

March 24, 2017 6:23am NYSE:XHB

home-remodel

From Jill Mislinski: Thursday’s release of the February New Home Sales from the Census Bureau came in at 592K, up 6.1% month-over-month from a revised 558K in January.


Seasonally adjusted estimates for November and December were also revised. The Investing.com forecast was for 565K.

Here is the opening from the report:

Sales of new single-family houses in February 2017 were at a seasonally adjusted annual rate of 592,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 6.1 percent (±17.3 percent)* above the revised January rate of 558,000 and is 12.8 percent (±18.0 percent)* above the February 2016 estimate of 525,000.

The median sales price of new houses sold in February 2017 was $296,200. The average sales price was $390,400. [Full Report]

For a longer-term perspective, here is a snapshot of the data series, which is produced in conjunction with the Department of Housing and Urban Development. The data since January 1963 is available in the St. Louis Fed’s FRED repository here. We’ve included a six-month moving average to highlight the trend in this highly volatile series.

New Home Sales

Over this time frame, we see the steady rise in new home sales following the 1990 recession and the acceleration in sales during the real estate bubble that peaked in 2005.

The Population-Adjusted Reality

Now let’s examine the data with a simple population adjustment. The Census Bureau’s mid-month population estimates show a 72.6% increase in the US population since 1963. Here is a chart of new home sales as a percent of the population.

Population Adjusted

New single-family home sales are 0.2% above the 1963 start of this data series. The population-adjusted version is 42% below the first 1963 sales and at a level similar to the lows we saw during the double-dip recession in the early 1980s, a time when 30-year mortgage rates peaked above 18%. Today’s 30-year rate is around 4.1%.

For another perspective, here is a chart of the median new home sale prices back to 1963, inflation adjusted. The data source is also the Census Bureau and can be found on the press release and website above. For inflation adjustment, we use the CPI-U, which is the Consumer Price Index for All Urban Consumers.

Here’s a zoomed in look since 2000.

For additional perspectives on residential real estate, here is the complete list of our monthly updates:

The SPDR S&P Homebuilders ETF (NYSE:XHB) was unchanged in premarket trading Friday. Year-to-date, XHB has gained 8.86%, versus a 4.70% rise in the benchmark S&P 500 index during the same period.

XHB currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #5 of 45 ETFs in the Consumer-Focused ETFs category.


This article is brought to you courtesy of Advisor Perspectives.


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