Welcome to today’s Real Estate news! In our latest updates, we have a press release on new residential sales, revealing some interesting insights into the housing market. Find out how mediocre new house sales in June confirm home builders’ pessimism, as reflected in declining median sales prices and low lumber prices. Despite the challenges, there is a glimmer of hope with home builder stock prices reaching all-time highs. Discover the seasonal adjustments for home building and the impact of high inventories on construction. We also explore the weakening new house market, inflation-adjusted prices, and the significance of lumber prices. Don’t miss the potential risk of a recession ahead and the implications of Federal Reserve actions on mortgage rates. If you’re interested in sharing your thoughts, join our community and create a free account. To learn more about these stories, click the link below.
New Residential Sales Press Release
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Mediocre New House Sales In June Confirm Home Builders’ Pessimism
An aerial view of new homes under construction.
As expected, today’s “New Residential Sales” report matched the other weak measures: The pessimistic home builder survey results, the declining real (inflation-adjusted) median sales prices, the low lumber prices.
The only bright spot is the home builder stock price run-ups to new all-time highs. Or is that mismatch a sign of excess investor optimism?
However that shakes out, here are the uninspiring fundamentals:
Note that the next six months are weaker than the first six. That is a strong seasonal shift that “seasonally adjusted” data attempt to hide. But the reality is that home builders gear down during the long period.
New house sales pre- and post-Covid 2020
Seasonal adjustments for home building
Home builders are normally very sensitive to their stock of “new houses for sale” inventories. They tend to average about six months of sales. Now, though, they have been carrying about nine months supply, a very significant 50% overage. Therefore, expect construction to get trimmed doubly: for the seasonal sales decline and for the readjustment of the high inventories.
Houses sold and for sale
After rising about 30%, nominal prices have stagnated. Adjusted for inflation, the prices are actually declining. Thus, another sign of a weakening new house market.
New house prices, nominal and inflation-adjusted
Inflation-adjusted lumber prices are back to their 2020 Covid lows. That is another important sign of slack home building.
Lumber prices, nominal and inflation-adjusted
New house construction is an important economic activity that boosts other industries. It also reflects the state of potential home buyers. Therefore, the weakening we are seeing carries the risk of a recession ahead.
Why? Because, despite the Federal Reserve assurances of having tamed inflation, prices continue to compound higher, eating into savings and income and budgets.
What about the Fed dropping interest rates? If it does so, mortgage rates are unlikely to follow suit. (See my recent article, “Home Builder Stocks Are At Risk.”)
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Best Home Warranties for New Construction 2024
Meredith Kucik and Tori Addison have evaluated and scored the best home warranty companies that offer premier home warranties for new construction. Purchasing a home warranty for your newly built home can be beneficial in case you encounter any unexpected issues.
New construction can come with its own set of potential issues, such as cut corners, builder-grade materials, and improper installations. While a builder’s warranty may cover structural and material defects, it may not provide coverage for major home systems and appliances.
A home warranty for new construction works similarly to a policy for a pre-owned home. The coverage will depend on the provider you select. Some policies may not cover appliance or system issues due to preexisting defects or improper installation, while more comprehensive policies may include coverage for building codes, modifications, and permits.
Liberty Home Guard, American Home Shield (AHS), and Select Home Warranty are among the top home warranty providers for new construction. Liberty Home Guard offers competitive coverage options and quick customer service. AHS provides coverage for unknown preexisting conditions and improper installations. Select Home Warranty stands out as the most budget-friendly option with exclusive sign-on discounts.
Each provider has different plan options and pricing, so it’s important to review the details and fine print before purchasing a home warranty for your new build.
If you’re interested in learning more about the best home warranties for new construction, click the link below.
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