New home sales rose slightly in April, defying expectations of a huge 22% drop

[FBaggins]

In one of the brightest economic readings since the start of the coronavirus pandemic, sales of newly built homes rose nearly 1% in April compared with March, according to the U.S. Census. While that may not seem like a lot, they were expected to fall 22%.

Builders have been reporting stronger demand lately, and sentiment popped back in May after falling sharply in April, according to a monthly index from the National Association of Home Builders.

“The April data for new home sales show the potential for housing to lead any recovery for the overall economy,” said Dean Mon, chairman of the NAHB and a home builder and developer from Shrewsbury, N.J. “Because the housing industry entered this downturn underbuilt, there exists considerable pent-up housing demand on the sidelines. The experience of the virus mitigation has emphasized the importance of home for most Americans.”

Mortgage applications to purchase a home have also been rising steadily for more than a month.


https://www.cnbc.com/2020/05/26/new-home-sales-rose-slightly-in-april-as-prices-fall.html

[at140]

1. I am hearing even in used homes segment, it is a seller's market!

Used homes are selling quickly. Must be the low-low-low mortgage rates.

[DavidDvorkin]

2. I wonder how much of this is people with money buying houses as an investment

For when the economy does recover.

The argument against this is that house prices haven't dropped.

[unblock]

3. I would be very wary about interpreting this

People are retiring, downsizing, and moving for Covid-19 related reasons. This could be driving a temporary surge in demand for new houses while leaving existing houses down, or down in some areas and up in others as property just shift and move around.

Long term, commercial real estate is expected to be hurt as companies now realize working from home can work, so they may reduce their demand for office space and rely on have office space for only, say, 2/3rds of their workers.

This is likely to hire residential prices as well, eventually.

So, hard to say, but I'd take the news with a grain of salt....

[FBaggins]

9. True enough

But it important to recognize that there could be substantial divergence between commercial construction and residential... as well as between existing sales (either commercial or residential) and new construction.

[NoMoreRepugs]

4. The "experts" who predicted/calculated a 22% drop are not EXPERTS.

That’s swinging at a fastball without a bat.

[uponit7771]

5. April & 1/2 of Mays numbers were already baked. People just don't drop contracts like that I'll wait

[FBaggins]

6. A "sale" is scored when the sales agreement is signed

The report reflects new decisions to purchase, not carryover from pre-COVID transactions that just weren't canceled.

[uponit7771]

14. Correct, that doesn't count cancellations or approvals. It took months to see top slide off of Bushs

... "no down payment act" assisted housing bubble.

It didn't fall 22% in a month then either, June numbers will be more reflective ... banks are in for some hurt

[FBaggins]

16. June's numbers are in - even better

https://www.democraticunderground.com/100213800271

[SWBTATTReg]

7. These figures are almost always adjusted afterwards, I wouldn't read too much into them. But,

mortgage rates have been dropping and rents keep going up, and from what I hear, landlords aren't being too receptive to tenant pleas for getting things fixed, or slowing down the pace of increases in the rent. Perhaps this is finally starting to backlash against the landlords.

The rental market has absorbed so many former 'home' properties (turning them into rental units instead), so perhaps the worm has turned, and the individuals instead of businesses have stepped back into the markets, and are buying these properties.

After the 2008 market crash, a lot of businesses instead of buying and turning homes around for perhaps a little profit, instead have turned tons of these properties into rentals instead, for a guaranteed cash flow (vs. an iffy housing market where they got burned pretty badly in the 2008 crash (houses sitting there forever, w/ no cash flow, waiting for a buyer down the road perhaps, etc.)).

[ScratchCat]

8. A Few things:

- Real estate is local. What is happening in one area may not be happening in others or all areas.

- April-July is the prime home buying period for many markets while November through February generally show the lowest sales

- With interest rates this low, this is to be expected

- There is a mentality among a certain segment of the market that they "must" have a new, un-lived-in home.

- The "expected to fall by 22%" was not a realistic prediction and was probably based upon the idea that job sites would be closed down(they weren't for the most part).

- There is still expected to be "retail armageddon" for the commercial sector; this will then trickle back to the residential market come fall.

[FBaggins]

10. Your scores

- True... but irrelevant. This is a national figure.

- True... but irrelevant. The figure is seasonally-adjusted. When they say that April was up over March, that means "even accounting for seasonal variations"

- True. I'm not sure how many would agree that it should be "expected"... but low rates are certainly playing a role

- True... but so? Or are you saying that you think the desire is COVID-related?

- I don't see the connection. Construction volume doesn't drive sales... it's the other way around.

- Businesses die off and/or shift to less-CRE-heavy models... but 100k deaths does not substantially impact the need for housing. There could definitely be some migration out of some denser areas to some suburbs... but that probably helps new home construction (while hurting resales in some areas).

-

[HotTeaBag]

11. I've been wondering about this, we purchased a home

and closed on it in February just before things hit the fan.

I thought that home sales (at least for the middle class) would drop because a lot of people who were planning on putting a $20,000 (or more) downpayment on a house would want to hold on to it because of economic uncertainty, and that banks would be much less inclined to lend because they couldn't rely on the borrowers being able to pay on the mortgage based on the same uncertainty.

I'm surprised that things aren't as catastrophic as predicted. But I'm also surprised at the reactions I'm reading to good news.

[FBaggins]

12. It's worth noting that this figure is just for sales of new home construction

Sales of existing homes have, in fact, fallen by about 25% (annualized) since the lockdown began. It may be that home values will decline, but sub-3% purchase-money rates could easily prop them up.

It's probably also worth considering who most often buys new homes. My guess is that market demographic has been much less likely to be furloughed than renters and those in the market for resales. We might also be seeing some movement out of cities and into suburbs (where there is relatively more new construction occurring)... but it might be too early for much of that.

Hope you enjoy your new home! You probably still got a great rate.

[HotTeaBag]

13. Good points.

That's kinda what I've been thinking - that the people who are still purchasing haven't really been affected economically by the shutdowns. Still, those with the money can see the writing on the wall that even (much) higher paid white collar jobs are at risk depending on what happens through the 3rd. and 4th. quarters.

[cbdo2007]

15. There is a huge group of people thriving right now...

who weren't impacted by COVID and who all got a free check from the Govt they didn't need, so they are spending like crazy right now. Really seniors and urban areas have been hit the hardest. Most of the people laid off are retail workers, restaurant employees, etc, who may be more likely to be renters, while middle class professionals in the suburbs really have been spared and are doing ok.

I realize this is all anecdotal but I live in a suburb of Kansas City and have a pretty good grasp of our middle class neighborhood. We have had like 100 cases of COVID total, now most of us work from home so are saving money on commuting, got an extra $3-4000 per family, and the construction crews around here have been working non stop on roofs, painting, siding, patios, etc. I know of people who bought new cars, a couple of families who have bought bigger houses.

It's really weird to be in a lightly hit part of the country, and to not really see the impact others are seeing, but it definitely exists and I'm sure we aren't the only ones.