This was well above consensus expectations. I’ve long argued that new home sales and housing starts (especially single family starts) were some of the best leading indicators for the economy. However, I’ve noted that there are times when this isn’t true. NOW is one of those times. The course of the economy will be determined by the course of the virus, and New Home Sales tell us nothing about the future of the pandemic.
This graph shows new home sales for 2019 and 2020 by month (Seasonally Adjusted Annual Rate).
New home sales were down 6.2% year-over-year (YoY) in April. Year-to-date (YTD) sales are still up 1.4%, but sales will be down YTD soon (although the comparison to May of last year is pretty easy).
And here is another update to the “distressing gap” graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales.
The “distressing gap” graph shows existing home sales (left axis) and new home sales (right axis) through April 2020. This graph starts in 1994, but the relationship had been fairly steady back to the ’60s.
Following the housing bubble and bust, the “distressing gap” appeared mostly because of distressed sales.
Now the gap is mostly closed. However, this assumes that the builders will offer some smaller, less expensive homes.
Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.