More Good News for Homebuilders
First, a few positive nuggets for homebuilders:
Rick Palacios Jr, Director of Research at John Burns Real Estate Consulting, pointed out that cancellation rates are “normalizing”. As I noted earlier, the Census Bureau overestimates sales, and underestimates inventory when cancellation rates are rising, see: New Home Sales and Cancellations: Net vs Gross Sales. This might be reversing now since cancellation rates have started to decline. When a previously cancelled home is resold, the home builder counts it as a sale, but the Census Bureau does not (since it was already counted).
And Odeta Kushi, Deputy Chief Economist at First American, pointed out that the lack of existing home inventory is a positive for homebuilders (linking to an article by chief economist Mark Fleming:
Here is a graph from the First Am article. The historically low levels of existing homes inventory is a plus for home builders.
And Ali Wolf, Chief economist at Zonda, wrote yesterday:
Last October I wrote: Some "Good News" for Homebuilders
[T]he good news for the homebuilders is activity usually picks up quickly following an interest rate induced slowdown (as opposed to following the housing bust when the recovery took many years).