What the resale market tells you about new home construction

December 20, 2011

by Scott Sambucci

6 comments

If you want to know if new home starts are going higher, watch the active market listings.

Residential housing reported higher numbers for November today. What do homebuilders know about housing that surprised the stock market today?

Home prices are getting less bad:

Year-over-year Housing Market Ask Prices: Altos 20-City Composite

How? Inventory is down.  While the foreclosures are clogged somewhere in the pipeline, there’s just not much available for Joe & Sally Homebuyer:

Year-over-year Inventory: Altos 20-City Composite

The homebuilders see what we see – when sellers get more confident on pricing, builders pick up their new home construction.  (Data measures at a 77% correlation):

Monthly Single-Unit housing starts (July 2010 - Nov 2011): US Census, November 20, 2011

Looking at quarterly data since 2007, there’s more of the same. (Data measures at a 76% correlation):

Housing

Quarterly Single-Unit housing starts (2007-2011): US Census

Link for US Census/HUD press release.

 

 

{ 6 comments }

maccagno December 30, 2011 at 10:46 am

is there a way to get such analysis on the French market ?

Maybe not ALTO but a french alternative ?

Thanks

MACCAGNO

Louise Carter January 11, 2012 at 12:46 pm

"The homebuilders see what we see – when sellers get more confident on pricing, builders pick up their new home construction." I agree and we are hoping that this year 2012 will have more new home construction project. We are seeing positive signs in real estate industry and this could be a result for a better market.

Patricia January 14, 2012 at 8:36 am

Cheers to that optimistic point of view! I am glad to know that there are people who believe that things are really going to be better despite the slump.

Blaine January 12, 2012 at 10:26 am

I agree with your assessment. Reductions in the existing inventory levels will be seized upon by builders, investors, and lenders who are sitting on excess land inventories. But keep in mind, builders can bring a lot of inventory on fairly quickly. In addition, builders, investors and lenders are sitting on a ton of entitled land that must be built out at some point in the future.

This push-pull action between the existing and new construction markets is going to go on for a long time.

Prahran apartments January 13, 2012 at 12:52 am

As a home builder, I think this can be really help! Your assessment seems very close to what currently happens. I just wonder how big or how fast the transition happens?

john keats March 30, 2012 at 5:53 am

I am glad to see a boom in home construction.Its nice that conditions are coming back to normal after the recent economic slump. I hope that it continues to blossom even in the next year.
Kelowna Real Estate

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