{"id":3626,"date":"2022-10-31T18:00:23","date_gmt":"2022-10-31T18:00:23","guid":{"rendered":"https:\/\/preprod.realtrends.com\/blog\/2022\/10\/31\/wheres-the-bottom-for-new-home-sales\/"},"modified":"2025-03-13T02:47:50","modified_gmt":"2025-03-13T02:47:50","slug":"wheres-the-bottom-for-new-home-sales","status":"publish","type":"post","link":"https:\/\/preprod.realtrends.com\/blog\/2022\/10\/31\/wheres-the-bottom-for-new-home-sales\/","title":{"rendered":"Logan Mohtashami: Where\u2019s the bottom for new home sales?"},"content":{"rendered":"\n

September new home sales<\/a> beat expectations, but don\u2019t get too excited. While monthly supply rose in this report, the previous reports were all revised lower and sale levels are still historically low. New home sales are now below the recession levels of 2000 and have fallen all the way to 1996 levels, when interest rates were near 8%.<\/p>\n\n\n\n

As I have always tried to stress with home sales data, we have not had a massive credit sales boom like the one we saw during the housing bubble years, so we can\u2019t have a similar huge sales bust working from such historically high levels. This is a positive in the sense that this downturn is more manageable: sales weren\u2019t elevated with a credit boom boosted by exotic loan debt structures, so finding that bottom level in sales is more reasonable.<\/p>\n\n\n\n

From <\/strong>Census<\/strong><\/a>: <\/strong>New Home Sales of new single-family houses in September 2022 were at a seasonally adjusted annual rate of 603,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 10.9 percent (\u00b115.2 percent)* below the revised August rate of 677,000 and 17.6 percent (\u00b115.9 percent) below the September 2021 estimate of 732,000.<\/p>\n\n\n\n

During the housing bubble years, new home sales, housing starts, prices and credit demand boomed to an extreme level. This was a very unhealthy setup because demand couldn\u2019t sustain itself, and new home sales and starts were set up for a significant, rapid decline. As you can see below, we aren\u2019t working from elevated levels today.



This doesn\u2019t mean sales can\u2019t fall further from here, especially with rising mortgage rates. However, it shows that the builders are better at managing their supply and demand imbalances compared to the housing bubble years. We saw some stabilization in the data when mortgage rates fell from 6.25% to 5%. However, now we are dealing with a 7% mortgage rate.

Monthly supply grew in this report, and this data line has always been crucial for my economic work over the past 10 years. <\/p>\n\n\n\n

My rule of thumb for anticipating builder behavior is based on the three-month average of supply:<\/p>\n\n\n\n