New Home Sales rose by 4.4% in November from October, to a
total of about 377,000. Relative to a year ago, sales are up a
good 15.3%. This increase in sales is very welcome and adds to
the signs of a broadening housing market recovery.
There was, however, a downward revision to the October numbers of
7,000 from a total of about 368,000. The November level also
somewhat lagged the expected rate of 379,000. Regardless of these
changes, the overall trend is still improving.
Also median sale price trended up clocking a gain of 3.7%
sequentially and 14.9% year over year.
Results by Region
Regional trends and numbers were very mixed. The Northeast, by
far the smallest of the four U.S. regions in terms of new home
sales, portrayed a definite improvement, with sales up 12.5% on
the month and up 69.0% from a year ago. In November 2012 the
region accounted for 7.2% of all new homes sold, up from 6.6% in
In the Midwest sales declined 12.5% sequentially and were also
down 5.8% on a year over year basis. In the West, sales were down
by 17.8% since last month but were up 13.7% since last year. The
South, by far the largest of the four regions (57.8% of total
sales in November), saw an increase of 21.1% for the month and
17.2% from last year.
New home sales have only exceeded the 400,000 level three times
since September 2008 when the financial markets collapsed. The
last was in April 2010, when sales surged by a tax credit for
With reference to the peak of the housing bubble in July 2005
(new home sales of 1.389 million), new home sales are still down
substantially by 72.9%, but still improving. Overall the report
looks positive and new home sales are significant as they have
historically led the economy out of recession since each new home
sold represents a lot of economic activity.
Not only are high new home sales good for the big homebuilders
D.R. Horton Inc.
), but also for all the companies that make the products and
supplies that go into making a new house. There is
Berkshire Hathaway Inc.
) for bricks, roofing materials and insulation,
) for plumbing fixtures and cabinets and
) for wallboard. The range also includes
PPG Industries Inc.
) for glass and paint to
Plum Creek Timber Co. Inc.
) for lumber.
It is of significance that all of the housing related data
released during the month buttressed the housing recovery (though
expansion remains a still far proposition), after suffering a
huge breakdown in 2006. Permit issuance, an indicator of future
building activity, rose 3.6% to a seasonally adjusted, annual
rate of 899,000 units in November. Though housing starts slid
3.0%, it should be viewed as a readjustment to more normal levels
of production following more than expected growth in the month of
September and October.
National Association of Home Builders/Wells Fargo Housing
Market Index (HMI), which reflects builder confidence in the
market for newly built, single-family homes, posted a solid, 26
point gain year-over-year to 47 for December. On a sequential
basis the index was up by 2 points. This marked the eighth
consecutive monthly gain in the confidence gauge and brings it to
its highest point since May 2006, when the index stood at 46.
While the inventory of existing homes for sale narrowed down to
4.8 months, down from a 7-month supply last November, sales of
existing homes rose 5.9 % to 5.04 million annual level.
With housing hopefully back on track, we believe it will be
one of the sectors to give a much required push to jump-start the
economy. It is also expected to generate jobs for the
twenty-somethings so they can move out of their parents' house
creating more demand for new homes and thus get the economy
BERKSHIRE HTH-B (BRK.B): Free Stock Analysis
D R HORTON INC (DHI): Free Stock Analysis
MASCO (MAS): Free Stock Analysis Report
PLUM CREEK TMBR (PCL): Free Stock Analysis
PPG INDS INC (PPG): Free Stock Analysis
USG CORP (USG): Free Stock Analysis Report
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