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October 6, 2018 | New Single Family Home Sales vs New Residential Construction

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
The above chart plots sales, held for sale, sold, and starts. It doesn’t quite add up, but it’s close.

Comparing New Home Sales and New Residential Construction

I totaled the above numbers in various ways and they did not quite match up. The Census Bureau explains.

We are often asked why the numbers of new single-family housing units started and completed each month are larger than the number of new homes sold. This is because all new single-family houses are measured as part of the New Residential Construction series (starts and completions), but only those that are built for sale are included in the New Residential Sales series. We categorize new residential construction into four intents, or purposes: Built for sale (or speculatively built): the builder is offering the house and the developed lot for sale as one transaction this includes houses where ownership of the entire property including the land is acquired (“fee simple”) as well as houses sold for cooperative or condominium ownership. These are the units measured in the New Residential Sales series. Contractor-built (or custom-built): the house is built for the landowner by a general contractor, or the land and the house are purchased in separate transactions. Owner-built: the house is built entirely by the landowner or by the landowner acting as his/her own general contractor. Built for rent: the house is built with the intent that it be placed on the rental market when it is completed.

Details 2017- Present

Numbers to Watch

  • Housing starts are a economic leading indicator.
  • News homes sales are tallied at contract time, but existing home sales are tallied at closing time.
  • The number of units “for sale” represent builder speculation.

Starts and sales peaked in November of 2017.

Builder Speculation continues to rise.

Mike “Mish” Shedlock

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October 6th, 2018

Posted In: Mish Talk

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