Homes for Sale – Various Indicators

For a developed economy like the U.S., for instance, the overall size of homes for sale Grafton (especially the new ones) is always considered an economic indicator, one of the many that signifies the health of a nation’s economy. For the reason that the sales of homes trigger consumption, they have a significant market impact.

New home sales also serve as a good indicator of economic turning points due to its consumer income sensitivity. In general, with when economic conditions slow down, new home sales serves as an early indicator of such a depression.

Basics

A new home sale is when the buyer signs the paperwork and gives the home builder a deposit. This is always the case since most new homes are not constructed until there is a buyer. Here, the buyer can also decide to customize all or part of the home’s features, which includes countertops, floor covering, and other fixtures.

For market indications, the Census Bureau releases the monthly estimates on these sales and gives them as an annual rate. If the sales will continues at the present rate, it is read as the figure that will sell within the year.

Spec homes

The Bureau also includes in the calculation the new spec homes in its sales figures, even though there is no buyer. Usually, these are the model homes that the home builders use to spur sales in the development.

Spec homes are counted as new home sales once the permit has been issued or construction has started. These new home sale is the first step in the 9 to 12-month process where if the new home sales will pick up, the closings will rise in about a year.

Other indicators

There are other new home economic indicators which the Census Bureau takes into account. First is the inventory. This is the total of homes that are available for sale, but are not yet sold. (This is reported every month by the NAHB.)

The other indicator is the number of months of supply. This number is how many months it would take to sell all the houses in inventory. This is based on the sales rate and the inventory, and this is also reported by the NAHB every month.

The last indicator is the sales price.  These are reported on both the median and the average3 new home sales price.

Uses of indicators

The indicators tell stories on the health of the home building industry and real estate in general. For instance, if the home starts are steady but the housing starts decline it would take a toll on home sales.

Many buyers might not want to wait longer than a year. This also means that there is a shortage of lumber, concrete or workers in the building industry. These shortages can drive up costs and consequently the sales price. Overall, it can further decrease demand for new homes.

If the mortgages are declining, the home builder ends up with inventory of unsold homes for sale, which means demand is high but home owners can’t get mortgages. Declining home closings in homes for sale mean the housing market is weak.