The new home market in the U.S. is showing surprising resiliency during 2020's coronavirus pandemic.
The following chart shows the trailing twelve month average of the market capitalization of the U.S. new homes, where we see that after last peaking at $21.7 billion in December 2020, the market cap of all new homes sold in the U.S. has ranged between $21.34 billion (March 2020) and $21.45 billion (January 2020) in the five months since, with the initial estimate for May 2020 at $21.38 billion.
To see the chart, click here.
That's pretty remarkable because the market for new homes could very well have tanked during the coronavirus recession the way it did when demand collapsed as the first U.S. housing bubble began deflating in 2005-2006.
Instead, the market for new homes in the U.S. has resisted falling the way other industries have, as demand has remained relatively strong. Here's how Reuters described May's sales figures:
Sales of new U.S. single-family homes increased more than expected in May, suggesting the housing market was on the cusp of recovery after being hammered, together with the broader economy, by the COVID-19 pandemic.
The Commerce Department said on Tuesday new home sales jumped 16.6% to a seasonally adjusted annual rate of 676,000 units last month. New home sales are counted at the signing of a contract, making them a leading housing market indicator.
April’s sales pace was revised down to 580,000 units from the previously reported 623,000 units. Economists polled by Reuters had forecast new home sales, which account for about 10% of housing market sales, rising 2.9% to a pace of 640,000 in May.
We would only quibble with Reuters' description of the housing market being "hammered" during the coronavirus pandemic. The historic data confirms the decline in the industry's market cap since December 2019 is almost trivial compared to the housing bubble deflation years. That's what real hammering for a distressed industry looks like!
U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 23 June 2020.
U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 23 June 2020.