Following up our analysis of the market for existing homes in the U.S., preliminary and revised data suggests that falling mortgage rates have coincided with a reversal in the late-2018, early-2019 decline in new home sales.
The following chart tracking the trailing twelve month average of the market capitalization of new home sales in the United States shows that rebound taking hold April and May 2019.
Market capitalization is the product of average new home sale prices and their number of sales. Looking next at the year-over-year growth rates for the trailing year average new home sales market cap in the next chart, we find that the latest data suggests the new home market has begun to rebound back into positive growth territory, while slightly older data has been revised upward to not be quite as negative as initial data previously indicated.
That sales rebound is occurring even though the average and median sale prices of new homes has been trending downward over much of the last year. The next chart shows the raw average and median sale prices of new homes in the U.S.
Considering median new home sale prices, that downward trend becomes more clear when we calculate the trailing twelve month average of the raw data presented in this chart, which we've plotted against the trailing twelve month average of median household income in the next chart.
The combination of falling median new home sale prices and rising median household income means that new homes have been becoming relatively more affordable. The last chart shows that the median new home in the U.S. is now costing about 5.05 times the median household income, down from a peak of 5.45 in February 2018.
New home sales data can be revised as many as three times in the months following its first being reported. Annual data for new home sales in 2018 is now available, with a median sale price of $326,400 and an average sale price of $385,000, but annual data for median household income in 2018 won't be available until sometime in September 2019.