Has the Housing Market Begun Normalizing?

September 8, 2020
Home at sunset
By Stuart Monk

Home builder LGI Homes reported a slight decline in home closings for August. The Texas-based company is regarded as a sales trend leader in the market, according to Seeking Alpha, making this decline that more important. For the month of August, LGI Homes closed on 669 homes compared to 677 in August 2019, totaling a 1.2% drop. Though the builder may be seeing a slight decrease, it only experienced a large jump in home closings this year during June. Home closings decreased by 9.1% in July compared to 2019. These numbers, paired with Redfin data pointing toward a one-month delayed seasonal peak, may point toward the market normalizing.

LGIH sold off 5.9% following this news in the middle of a larger stock market sell-off. The stock looks like it is trapped in a two-month consolidation (maybe topping?) pattern between $100 and $120.

Last month’s report on single-family new home sales helped to confirm a V-shaped recovery in the housing market. These strong sales numbers are not simply the artifact of buyers playing catch-up from the coronavirus pandemic lock-downs.

Year-over-year sales numbers further illustrate the robustness of the market for new homes over the last 3 months: March -7.5%, April -14.2%, May +14.5%, June +9.0%, July +36.3%.

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