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What are the Most Active New Sales Markets?

New Home Sales Growth

New home sales have totaled 441,000 over the last 12 months ending in January, up 3 percent from a year ago1. While still below the 660,000 annual average of the last 50 years, the national and regional data available from the Census Bureau mask local pockets of strength. In this post, we use public record deeds as the source of new home sales to examine patterns in the 50 metropolitan areas with the highest number of new sales. We evaluate markets by ranking them on two metrics: new home sales growth and new home sales share. The analysis reveals that the healthiest new home sales markets are primarily in the South, especially in Texas and the Carolinas.

Eight of the 10 fastest growing new home sales markets are in the South and the fastest growing new home sales market in the U.S. is Nashville, Tenn., where new sales grew by 17 percent over the prior year (Figure 1). Nashville is not only exhibiting strength over the last year, but it is one of only five markets that have higher new home sales in 2015 than in the very early 2000s when markets were more normal. The second fastest growing market is San Jose, Calif., where new sales grew 14 percent from a year earlier. It is also one of the five markets that is currently larger from a new sales volume perspective in comparison to the early 2000s. Atlanta, Ga. is the third fastest growing market, where new sales are up 10 percent from a year ago. Atlanta’s new home market strength is particularly remarkable given that distressed sales still account for 16 percent of all sales–by far the highest of the three markets. As distressed sales continue to fall in Atlanta, that will give additional marginal lift to new sales.

New Home Sales Share

New Home Sales Share

Of the 10 markets with the highest new sales share, seven are either in Texas or the Carolina’s (Figure 2). The market with the highest new home sales share is El Paso, Texas where 22 percent of all sales were new construction, compared with only 8 percent nationally. While most markets have had large swings in overall sales and prices over the last few years, the El Paso housing market has been stable, and the same is true of new sales, which have consistently averaged 22 to 24 percent of overall sales the last 15 years. The market with the second highest new sales share is Raleigh, N.C., where new sales account for 21 percent of all transactions. However, while Raleigh has an elevated new sales share, it began to trend down in 2014 in response to the rapid price appreciation and higher rates. This is confirmed by the 5 percent decline in single-unit permit construction that occurred in 2014 compared with 2013. The good news is that Raleigh’s permits have strengthened in the first three months of 2015 and are running slightly ahead of 2014. The market with the third highest new sales share is Charleston, S.C., where new sales averaged 20 percent of all transactions. Charleston’s new home sales market has been steadily improving and is also one of the five markets out of the top 50 that has more new sales than in the early 2000s. The one concern in Charleston is the rapid price appreciation for new homes, which has increased by over $60,000 during the last two years alone, which is more than new home prices appreciated between 2000 and 20122.

Overall, while new home sales remain relatively low in comparison to normal times, there are several southern markets that buck the national trend. Looking forward, southern markets with strong demographic growth will exhibit robust new home sales activity. In many of the remaining metros with solid job growth, the reality of very low inventory of unsold new homes, declining vacancies and rapid price appreciation will lead to more construction in the next few years that will lift many more markets above their current new home sales trajectory.

[1] The remainder of the data and trends cited in this article is for the 12 months ended in January 2015.
[2] The rise is partly due to a changing mix of new sales to larger new homes with more amenities, but still given the low inventory it would serve a tailwind to the expansion of new sales.

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