US New Home Sales: September 2018

Fast on the heels of US existing home sales a few days ago, on Wednesday contracts for new US single-family home sales declined in September, as eroding affordability conditions reduced sales volume, according to data are produced by HUD and the US Census Bureau. New single-family home sales declined to a significantly lower 553,000 seasonally adjusted annual rate, a 5.5% drop from a downwardly revised 585,000 annual rate recorded in August.

SOURCE: NAHB Eye on Housing

Despite the softer summer and early fall numbers, total sales for the first nine months of 2019 (485,000) are 3.5% higher than the comparable total for 2017 (469,000). Nonetheless, mirroring declining sales volume for the resale market, higher interest rates, storm disruption effects, and spring and summer hikes in lumber prices have taken a toll on the nation’s building markets, even as macroeconomic conditions remain positive.

Inventory increased in September to 327,000 single-family homes for sale. September saw a notable uptick in homes not-started construction but otherwise listed for sale, rising from 57,000 in August to 64,000 in September (compared to 47,000 in September of 2017).

Median new home sales pricing, meanwhile, has decreased over the last year as the mix of supply has adjusted. Median new home price was US$320,000 in September, compared to US$331,500 a year ago.

This graph, created by Calculated Risk, shows the “distressing gap” between existing home sales (left axis) and new home sales (right axis) through September 2018. This graph starts in 1994, but the relationship had been fairly steady back to the ’60s.

SOURCE: Calculated Risk

Months of inventory is now above the top of the normal range, however the number of units completed and under construction is still somewhat low. Inventory will be something to watch very closely.