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    More New-Home Sales Are for Houses That Haven’t Even Been Started Yet. That’s Not a Good Thing.

    Justin Sullivan/Getty Images

    The percentage of newly constructed homes sold that hadn’t even been started yet has climbed to a fresh one-year high.

    In late 2017, MarketWatch published a story called “More Americans are buying new homes that haven’t even been started yet.” At the time, Rob Dietz, the chief economist for the National Association of Home Builders called it “a real confirmation of strong demand.”

    In the Commerce Department’s new-home sales release, out Tuesday, that metric just hit the highest since that story ran last year, at 34.3%. But with a challenging 2018 in the rearview mirror—new-home sales were basically flat compared to 2017, big builder stocks lost 20%, and some economists think we’ve hit the end of the cycle—Dietz is humming a different tune.

    A look at the share of new homes sold that have not been started.

    MarketWatch

    Rather than focusing on the numerator, the number of homes for which customers plunked down money, Dietz is now looking more closely at the denominator, the overall number of homes builders are generating for sale. In other words, he’s looking at supply a little more closely than demand.

    “We know demand is moving with interest rates,” Dietz told MarketWatch. “What this reflects is that builders were more cautious due to the wind coming out of the sails of the market. To me this reflects caution on the supply side.”

    It bears repeating that more home purchases are both a good sign for the economy (jobs for laborers, purchases at Bed Bath & Beyond, demand for movers and gardeners and garage door installers, and so on) as well as a signal from consumers that they feel strong enough about their job prospects to sign on the dotted line.

    Still, Dietz thinks only time will tell whether that demand will persist. Or whether the numbers from the December new-home sales report will be revised away once or twice.

    “Take it with a grain of salt,” Dietz advised.

    The post More New-Home Sales Are for Houses That Haven’t Even Been Started Yet. That’s Not a Good Thing. appeared first on Real Estate News & Insights | realtor.com®.

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