The Census Bureau’s most recent report on sales of new single-family homes provided a breath of fresh air to what had been a sour start to 2019 for stakeholders in the home construction market. To be sure, sales declined by 7% in April, but the decline came from a very high base that was further bolstered by upward revisions to previous months’ sales. In fact, in March 723,000 new single-family homes were sold—the strongest monthly sales figure in more than eleven years.
New single-family home sales are an excellent gauge of demand for housing in the near term. Once we make a few assumptions about the share of homes that are built by owners (and thus never put up for sale), the single-family share of housing, and the share homes that are started but not completed, we can map new homes sales to future housing starts. Our analysis assumes that owners will build 25% of new homes, that 70% of new homes will be single-family units and that 2% of homes that are started will not be completed. We also assume that inventories will remain flat.
New single-family home sales have averaged 677K units over the first four months of 2019. Using the assumption laid out above, this maps to 1.316M housing starts. Our housing forecast assumes that starts will average 1.281 over the remainder of 2019. For the first time this year, the risks to our forecast appear to be tilted toward the upside.