• It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

Takeaway: New Home sales rose 4.4% in November. Limited supply and rising demand are working together to push home prices higher.

New Home Sales: Another Strong Print in November

New home sales rose 4.4% MoM in November to 377k (SAAR). October data was revised down from 368k to 361k making the comp easier. On a year-over-year basis, new home sales in November are up 19.7%.

The inventory of new homes for sale rose to 149k in November, up from 147k in October. This continues an emerging trend of rising inventory, marking the third consecutive month in which inventory has grown, albeit off an all-time low base of 141k in August. When looking at inventory on a months supply basis, November stood at 4.7 months, which was down MoM from 4.9 months. For perspective, months supply floated between 4-5 months from 1, and has been in the mid-4 to low-5 months range YTD.

We would expect to see inventory levels rise, as this reflects a strengthening market. This is counterintuitive, we realize, but in looking at the long history of price in relationship to inventory levels, they have a strong positive correlation.  

The median price of new homes sold in November rose 15% vs the prior year, a continuation of the trend we've seen year-to-date.

We continue to believe that home prices are heading meaningfully higher in 2013. This morning's New Home Sales data, showing a rising sales rate and falling months supply of inventory, supports our thesis.

NEW HOME SALES: THE PACE OF SALES ACCELERATES, MONTHS SUPPLY FALLS - NHS   Sales   YoY

NEW HOME SALES: THE PACE OF SALES ACCELERATES, MONTHS SUPPLY FALLS - NHS   LT

NEW HOME SALES: THE PACE OF SALES ACCELERATES, MONTHS SUPPLY FALLS - NHS   Inventory

NEW HOME SALES: THE PACE OF SALES ACCELERATES, MONTHS SUPPLY FALLS - NHS   Inventory LT

NEW HOME SALES: THE PACE OF SALES ACCELERATES, MONTHS SUPPLY FALLS - Median

Joshua Steiner, CFA

Robert Belsky