New Home Sales Rocket 33% in August – Why You Should be Skeptical

by Peter Thomas Ricci

New home sales rocketed to the moon in August, but such data should be taken with a grain of salt.

Here’s some glorious news to brighten up your day – according to new Census Bureau numbers, the sales of newly built single-family homes in August were at a seasonally adjusted annual rate of 504,000, an 18 percent increase from July and a 33 percent increase from August 2013. At this rate, new home sales will have their best totals in six years, and this month’s increase in builder confidence is making sense.

Those are all encouraging developments, no doubt, but there are some nuances to the data that we should point out. By no means are we sourpuss skeptics here at Houston Agent, but for you and your client’s sake, keep these things in mind:

Volatility – New home sales are an infamously volatile statistic, and looking at sales on a wider margin provides a much different perspective. As The Wall Street Journal noted, new home sales are only up 2 percent in 2014 by year-to-date measures.

Revisions – Consistent with their volatility, new home sales stats are also constantly revised. Case in point, way back in June, the Census Bureau reported that in May, new home sales were at a rate of 504,000…but come July, the bureau revised that number down to 458,000.

Margin of Error – New homes sale stats also come with a significant margin of error, and August’s numbers were no exception. That 18 percent increase, for instance, came with a margin of error of 16.3 percent!

Pricey Pricey – Finally, though this following piece of information is not explicitly related to the questionable nature of new home sales data, it warrants mentioning – new homes just keep getting more expensive. Through August, the median sales price of a new home was $275,600 (up 2.1 percent from July and 8.2 percent from August 2013) and the average sales price was $347,900 (up 2.5 percent and 9.1 percent). The price of new homes has risen by a third since 2004; as housing continues to become less accessible for certain consumers, price is something that should be on the radar for all agents.

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