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New-Home Sales Drop Nearly 1% in September, Coming Off Previous Month’s Near-Record Sales Levels
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The numbers: Sales of newly-constructed homes in the U.S. decreased 0.7% on a monthly basis in September to a seasonally-adjusted annual rate of 701,000, the government reported Wednesday.
That’s down slight from a downwardly revised rate of 706,000 in August, which was almost as high as the 12-year record set back in June. Compared with September 2018, new-home sales were up 15.5%.
This was the first time since 2007 that new home sales exceeded a 700,000 annual pace for two straight months.
What happened: New home sales fell for most of the country. They decreased most significantly in the West, where the sales volume was 3.8% lower than the previous month, followed by the Northeast (down 2.8%) and the South (down 0.2%). The Midwest was the only region where new home sales picked up from August, rising 6.3%.
At the end of September, the government estimated there was a 5.5-month supply of new homes available for sale, in line with the previous month but slightly below the six-month threshold that represents a balanced market. Last December, the supply of homes peaked around seven months.
Big picture: The small sample size used to produce the new-home sales figures can make the report very volatile and prone to large revisions. For instance, the pace of new-home sales in June was later revised to 729,000 after an initial reading of 646,000.
Despite the erratic nature of the new-home sales figures and the decline in September, the trend for new home sales is upward overall this year. On a non-seasonally adjusted basis, new homes were selling at an annual rate of 527,000 so far in 2019. At the same point last year, sales were occurring at an annual rate of 491,000.
Last year, economists suggested that the housing market may have hit its peak. But then mortgage rates came crashing down to near-record lows this summer, giving the housing market a boost. Though rates have since risen from those low levels, overall the rate environment should prop up sales somewhat. Particularly when it comes to newly-constructed homes, the limited inventory of properties for sales overall should keep demand for new homes high.
Notably, the median sales price of a new home was $299,400 in September, down from a revised $325,200 the month prior. “Hopefully this shows that builders are working to construct more affordable housing, and that median price will continue to drop,” said Robert Frick, corporate economist at Navy Federal Credit Union.
What they’re saying: “Builders have finally ramped up single-family home activity this year, as new home sales in recent months are running more than 10% higher than the 2018 yearly pace, while existing home sales, which are hamstrung by a lack of inventory, are down slightly year-to-date,” Stephen Stanley, chief economist at Amherst Pierpont, said in a research note.
Market reaction: The Dow Jones Industrial Average and S&P 500 dropped slightly in Wednesday trades, and the 10-year Treasury note’s yield was down.
Shares of home-building firms, including PulteGroup, D.R. Horton, and Lennar Corp. fell in morning trading following the new home sales report’s release.
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