When it comes to new home sales, the first half of 2014 was the victim of the cold weather, but more so the victim of the large price hikes that occurred in the first half of 2013. We are long past the weather factor, and we are seeing consumers start to get past the sticker shock. Our research shows that traffic is more prone to turn into sales now.
There is something else that is auspicious about this mid-year mile-marker. We have just passed the point where (numerically speaking) we have regained all of the jobs that were lost during the downturn. Granted, they aren’t the same jobs, but the number of jobs is back to where it had been (admittedly the new hires have lower wages, and that dulls the impact).
The key point is that we are now going to start adding to aggregate employment again, adding to incomes and spending power. Now people will not only be more confident about buying homes and there will, for the first time since the downturn began, be more potential new-home buyers than we had before the downturn began. (You have to have a job if you want to get a mortgage).
Household formations are running very low, but they will rise soon. Conservatively, we’ll soon go from the current rate of 500,000 or so to over 1 million (eventually to 1.2 to 1.4mm). That means more than a doubling of the key driver of new home demand over the next two or three years.
Read the full release of New Residential Construction from the Census here.
