New Home Sales and Cancellations: Net vs Gross Sales

 Today, in the Calculated Risk Real Estate Newsletter: New Home Sales and Cancellations: Net vs Gross Sales

A brief excerpt:

Tomorrow (Tuesday), the Census Bureau will report new home sales for August. The consensus is for 500 thousand on a Seasonally Adjusted Annual rates (SAAR) basis, down from 511 thousand in July.
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When looking at new home sales, we are interested in net sales for each month, however the Census Bureau reports gross new sales. A simple equation would be:

Sales (net) = Sales (gross) – Cancellations + Sales of earlier cancellations.

In the long run, the cancellation terms balance out, and the Census Bureau numbers are what we want. In other words, Sales(net) = sales(gross). But in the short run, when cancellations increase, the Census Bureau overestimates sales; and when cancellations decrease, the Census Bureau underestimates sales.
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The bottom line is - with rapidly rising cancellations - the Census Bureau will overestimate sales tomorrow (and underestimate new home inventory).

https://www.calculatedriskblog.com/2022/09/new-home-sales-and-cancellations-net-vs.html