Based on the latest estimates, the market cap for the new home market in the U.S. began to rebound in June 2021 and continued to rise in July 2021. The proof for that bold claim can be seen in the first chart below, which shows the trailing year average historic and inflation adjusted market capitalization for new homes sold in the United States from January 1976 through July 2021.
After bottoming at a nominal $28.92 billion in May 2021, the market cap for new homes sold in the U.S. has risen to an initial estimate of $30.12 billion in July 2021. For the data shown in the chart, it takes roughly 6-10 months for the data to become finalized after the initial estimate, so these figures are subject to change, but overall, the estimate will capture the trend.
That's the good news. The bad news lies in what's behind the rebound for the U.S.' new home market cap....
Market capitalization is the product of the average sale price of new homes and the number of sales. The following chart shows the annualized trailing year average number of new home sales recorded in the U.S. from January 1976 through July 2021.
As you can see, the number of new home sales peaked in November 2020. The number of new homes sold each month since has been in a downtrend, including for the latest month of July 2021.
But the market cap of new homes sold in the U.S. has risen during the last two months. The only way that math works is if the average sale prices of new homes is rising faster than the number of sales is falling. In other words, new home sale prices are inflating faster than sales are being made.
That's not surprising, given how things have generally played out in the U.S. economy in 2021. But it does suggest that the new homes portion of the real economy of the U.S. is shrinking.
As we noted earlier, the data we're reporting today will be subject to revision for some time to come, so the final picture may look different than it does today. The real question is how different.
References
U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 24 August 2021.
U.S. Department of Labor Bureau of Labor Statistics. Consumer Price Index, All Urban Consumers - (CPI-U), U.S. City Average, All Items, 1982-84=100[Online Application]. Accessed 11 August 2021.