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New Home Sales Will March to New Highs Soon

Let me go out on a limb and report now that new home sales are indeed marching forward and should be looking more positive on both a month-over-month, and year-over-year basis.

Metrostudy collects data on traffic and sales from builders around the country. The data isn’t as reliable as the full census we do in the field, inspecting subdivisions lot-by-lot, or by the lagging data on home closings, but in aggregate the traffic and sales metrics give us visibility into key leading trends.

The most reliable way to compare traffic and sales month-to-month and year-over-year is to look at the average traffic and average sales number per community, as that helps to control for changes caused by more or fewer communities. Think of it as “same store sales.” So if the average traffic and sales numbers go up, builders are seeing better results across their communities.

We are seeing 2014 perform following a classic new home sales pattern. In such a pattern, sales should grow each month into the spring and summer, and decline in the second half of the year (reflecting the extreme seasonality of real estate and construction).  Every month this year has reflected improving momentum—just as a classic seasonal pattern would predict.  But when compared to last year (which looked more like the industry was shot out of a cannon in January), sales haven’t been as strong.  The most negative bears said it was more than the weather.  I say it was weather and a very abnormal start to last year.

It’s time for the bears to wake up and realize spring has sprung, because we hit a new milestone at the end of March, even though the month was still harsh for winter weather.  In looking at our weekly traffic numbers, the most significant story was seen in the final week of March.  The last week of March recorded the best traffic and sales over at least the past four years for the same period.  That was also the first week in 2014 that both the traffic and contract average surpassed the same data points in 2013.

 

By  – Builder Online 4/22/2014