Blog Layout

New home sales beat estimates, but what does it mean? Homebuilders have their own playbook

DDA Mortgage • June 27, 2022


New home sales beat the headline estimates and had positive revisions. How on earth did that happen? Not only that, the monthly supply data was revised lower from nine months to 8.3 months for the previous report. Let me tell you, we had a lot of shocked faces in economic land this morning.


First, we must never forget that the new home sales reports can be very wild month to month and that positive or negative revisions are widespread. However, this report did have positive revisions to go with it, so it’s not just a headline beat.


Here is the honest truth about the new home sales data: We came off the weakest new home sales recovery ever in the previous expansion. We never had a housing bubble credit boom, so we can’t have a housing bubble credit boom-bust. This means sales were never really working from a massively elevated level, pushed by exotic loan debt structures loans. This is a critical thing to remember going out the next few years. 


From Census: New Home Sales Sales of new single‐family houses in May 2022 were at a seasonally adjusted annual rate of 696,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 10.7 percent (±18.9 percent)* above the revised April rate of 629,000, but is 5.9 percent (±22.0 percent)* below the May 2021 estimate of 740,000.

As you can see below, new home sales are still below the 2000 recession level, and we just had a significant spike in mortgage rates too. These monthly reports can be very wild, and I anticipate big swings in the reports until things calm down with mortgage rates.

From Census: Sales Price The median sales price of new houses sold in May 2022 was $449,000. The average sales price was $511,400.


We can see below, pricing got pretty crazy after 2020. The builders had pricing power and used it well to make their margins look great, even with all the added costs to build their homes. The market has changed with rates so much higher, but for the most part, the builders are managing the recent weakness in sales as best they can. Don’t be fooled by this report, they know what they’re dealing with, now that mortgage rates are above 6%. 

Census: For Sale Inventory and Months’ Supply The seasonally‐adjusted estimate of new houses for sale at the end of May was 444,000. This represents a supply of 7.7 months at the current sales rate.


The monthly supply data for new homes often get mixed up with the existing home sales market. People go to the Fred website, type in the monthly supply, and believe it’s the existing home sales marketplace. I deal with people who tell me the monthly supply is 7.7 months. They think there is no housing shortage.

So, for Twitter, I had to create a rule.


We have two rules

1. We don’t talk about Fight Club
2. We don’t say the new home sales market supply is the existing home sales market.

The existing home sales market monthly supply is running at 2.6 months.


Five months of the supply are homes in construction. That is a high level, and two months of the supply hasn’t started construction yet, and a whopping 0.68 months are completed homes. Yes, I went below one month there. As someone who wants to see more inventory, not the best data lines, but we are working our way to finishing those homes.


My rule of thumb for anticipating builder behavior is based on the three-month average of supply:

  • When supply is 4.3 months, and below, this is an excellent market for the builders.
  • When supply is 4.4 to 6.4 months, this is an OK market for the builders. They will build as long as new home sales are growing.
  • The builders will pull back on construction when the supply is 6.5 months and above.


The builder’s confidence has fallen noticeably as their business model is at risk with higher rates. Today’s new home sales report doesn’t change the fact that the builders are mindful of what they’re dealing with. This is the reason why their confidence levels have fallen.

From NAHB:


I recently raised my fifth recession red flag because of this drop in their confidence, sales, and housing permits and this report doesn’t change that. Again, this cycle is much different than the run-up in 2002-2005; hopefully, you can see that with the data I have provided. I have a running joke with my housing-crash friends that they keep screaming 2008 but purchase application data today is already below 2008 levels. Awkward!


Overall, the new homes sales was a shocking report, not only as a headline beat, but with positive revisions on sales and monthly supply data falling with revisions on monthly supply data. I can’t recall a more shocking new home sales report than this.


With that said, these reports are very wild monthly and can be all over the place over the next 12 months. This is why revisions are crucial, and until builder confidence changes course, I would not put too much weight on this one report. However, I would focus on the fact that new home sales are trending back at the lows we saw in 2018, the last time rates rose. Not exactly a booming period of sales. In fact, just for some context, new home sales today are back to 1996 levels.



There is a benefit of not having a credit boom in housing this time — that means you can’t have a significant housing bust. This means during the downturns, the builders can manage their supply better. I would add this final note for next year. As the total inventory for existing homes grows, the builders will be mindful of this, which is one other reason why I believe they will slow down construction. The existing home sales market is their biggest competitor, and they have benefited from the inventory in that sector falling to all-time lows. If we get the total existing inventory back toward 2 million that benefit is gone. It’s currently at 1.16 million.


Have A Question?

Use the form below and we will give your our expert answers!

Reverse Mortgage Ask A Question

Start Your Loan with DDA today
Your local Mortgage Broker

Mortgage Broker Largo
See our Reviews

Looking for more details? Listen to our extended podcast! 

Check out our other helpful videos to learn more about credit and residential mortgages.

Habitat for Humanity sees success with aging in place program

By Didier Malagies • January 22, 2025
A dedicated aging in place (AIP) program offered by the Oswego County Habitat for Humanity (OCHFH) in New York says it is seeing success by incorporating family, community and local resources to ensure older homeowners can remain where they prefer. “It’s been projected that, over the next 20 years, households led by individuals in their 80s will become the fastest growing age group , which provides stability within their communities,” said Samuel Raponi, OCHFH executive director. Through the organization’s AIP program, Habitat collaborates with families, local organizations and other community members in an effort to provide homes that prioritize living for older adults, he said. “This ultimately enhances their quality of life. We employ two different assessments in each case to ensure that the homeowners’ needs are clearly understood,” he added. An initial assessment of the client’s living situation aims to assess each person’s daily living activities, which are scrutinized by a “health or human services professional,” the organization said. This includes how they manage regular tasks like cleaning, shopping, paying bills or interacting with their community. A second evaluation specifically assesses home repair needs, and how to make a dwelling more livable for the needs of an older person. “These assessments enable OCHFH to provide modifications to their homes tailored to each homeowner’s specific lifestyle,” Raponi added. “Among the kinds of modifications we make are installing lever door handles, ramps, railings, grab bars, walk-in showers with a low threshold, and raised toilets to make homes more accessible for older adults.” Other resources, including Meals on Wheels , may be seen as necessary to deploy depending on a person’s circumstances, and all combine into a living situation that is aimed at being more generally beneficial for someone seeking to age in their own home. AIP is actively seeking more collaborative partners in the health care sector, owing to unique challenges visited upon older people who may not be able to adequately address their health needs. “Low-income older adults face a higher risk of chronic diseases and disabilities due to limited access to primary care and a greater likelihood of living in substandard, deteriorating housing,” Raponi added. A recent study from Carewell suggested that many older adults see aging in place as a financial necessity considering the costs of other kinds of living arrangements older people may choose. Nearly half of respondents (47%) characterized aging in place as both a preference and a financial necessity in tandem. 

Is it time to prequalify for a mortgage now

By Didier Malagies • January 20, 2025
1. Assess Your Financial Health Credit Score: Check your credit score (usually 620 or higher is required, though higher scores get better rates). Debt-to-Income Ratio (DTI): Calculate your monthly debt payments compared to your gross monthly income (lenders typically prefer a DTI below 43%). Savings: Ensure you have enough for a down payment (typically 3-20%) and closing costs. 2. Gather Financial Information Lenders will need the following: Proof of income (pay stubs, tax returns, W-2s/1099s). List of assets (savings, investments, retirement accounts). Details of current debts (credit card balances, student loans, etc.). 3. Choose a Lender Research different lenders, including banks, credit unions, and online lenders. Compare prequalification options (many allow online applications). 4. Complete the Prequalification Process Fill out the lender’s prequalification form (online, over the phone, or in person). Provide basic details about your income, debts, and assets. 5. Review Prequalification Results The lender will give you an estimate of the loan amount and potential interest rate. Remember, prequalification is not a guarantee of approval and doesn’t involve a hard credit inquiry. 6. Follow Up with Preapproval If you’re serious about buying, consider getting preapproved, which involves a more in-depth review and is stronger than prequalification. Tips: Use online calculators to estimate affordability before reaching out to lenders. Avoid large purchases or opening new lines of credit during the prequalification and preapproval process. Would you like details on specific lenders or tools to compare mortgage options? tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329

USA Today: If Social Security falters, reverse mortgages could be worth a look

By Didier Malagies • January 13, 2025
Many retirees have said they rely largely — and sometimes entirely — on Social Security benefits as their primary income stream in retirement . But in instances where these payments may not be enough to make ends meet, other options should be considered — and in the right situation, a reverse mortgage could be one such option.  That’s according to a column published this week by USA Today , which assessed reverse mortgages in tandem with options such as personal savings, a part-time job and other benefits programs. “A reverse mortgage is a possibility for seniors with substantial equity in their homes,” the column stated. “It essentially enables you to borrow against your equity, and you aren’t required to make any payments while you’re still alive as long as you live in the house.” The column is likely referencing the Home Equity Conversion Mortgage ( HECM ) program insured by the Federal Housing Administration (FHA). Loan proceeds are dependent on the amount of equity in the home and current interest rates, the column noted, and there are multiple disbursement options available, the column noted. The minimum age requirement of 62, a core tenet of the HECM program, was also mentioned. “There are closing costs and other fees, and you’ll still be responsible for maintaining the property and paying the property taxes and homeowners insurance,” the column noted. It characterized the loan as a “solid option” for those who have few other assets beyond their homes, adding that “it might not be the right move if you intend to pass the property on to your heirs someday. After you pass away or move out of the home, you or your estate will have to repay the loan. This will reduce how much your heirs receive.” Recent survey data from Clever Real Estate highlighted some realities of relying on Social Security benefits in retirement. Roughly one in five respondents in the 1,000-person survey said they rely exclusively on Social Security benefits as their sole income stream in retirement, with nearly 30% saying they believed they would be able to rely on them. Last year, data from Nationwide suggested that an increasing number of older investors believe that retiring at the age of 65 is no longer a realistic option . This is largely tied to higher levels of stress they’re feeling about the economy and the cost of living.
Show More
Share by: