“If the roots are not severed … There will be growth in the spring.” — Chance the gardener, from the movie “Being There.”
The federal government released its data on December new home sales, and showed a nice increase of 10.8% compared with November. For the entire year, sales were up 14.5% versus 2013.
As we consider these home sales data, it is worth taking a look at the results in markets around the country. The government survey does not provide any geographic granularity; The details here come from Metrostudy’s proprietary survey. Results were somewhat mixed, by market, in December.
In Southern California, both traffic and sales were very slightly lower in December 2015 then they were a year prior. So far in January, traffic and sales remain slightly lower. Cancellation rates have been running higher than one year ago, at 21%. This time last year, cancellation rates were closer to 18%.
Sales are off in Houston. This is not a surprise, given the job and income losses related to upstream energy (exploration).
More surprising is the fact that Denver, which had been one of the strongest housing markets in the country throughout this cycle saw weakness in December 2015, with traffic and sales both lower than in December 2014, and cancellation rates rising (to 22%).
Las Vegas meanwhile had a slightly better December last year than the year before, in terms of traffic, sales, and cancellations, which was much better than in 2013. We can see the effects of the labor shortage in markets like Las Vegas, where starts are up about 20% compared with four quarters ago, but observed closings are up only 8%.
An important demand indicator has shown significant improvement. Household formations are now running at close to 1.5 million annually, up significantly from 500,000 – 600,000 a few years back (people were doubling up for economic reasons). This bodes well for housing demand in 2016. We are projecting a 15.6% increase in new home sales nationally for this calendar year. This forecast will begin with more “growth in the spring.”
