New Home Sales Drop in June Even as Median Price Falls

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales FELL 5.3 percent in June to 631,000 (Seasonally Adjusted Annual Rate);
  • Unsold inventory increased 5,000 in June to 301,000 but the inventory for May was revised downward to 296,000 from 299,000;
  • The months’ supply of new homes for sale ROSE to 5,7 in June from 5.3 in May
  • May sales were revised downward to show an increase of 3.9 percent instead of the originally reported 6.7 percent
  • Median price of a new home DROPPED $7,600 from May to $302,100;
  • Year-year the median price of a new home was DOWN $13,100 (4.2 percent)

Trends:

  • The drop in the pace of sales was the largest this year and driven by declines in the Midwest. South and West;
  • The median price of a new single-family home dropped for the third straight month, falling to its lowest level since February 2017;
  • The median price has declined every month this year except March.

Data Source: Census Bureau and Department of Housing and Urban Development

Image result for new home sales

Following the pattern set by existing home sales which fell 0.6 percent in June, new home sales declined by the largest month-month percent this year.

Although the two reports are not directly comparable – the National Association of Realtors’ existing home sales report is based on closings and the government report on new home sales is based on contracts – they provide a sense of the direction of the home sales market.

New home sales – which involve the construction of a new home are less than 10 percent of all home sales — have a greater impact on the economy because they involve the creation of an asset while existing home sales reflect the transfer of an asset.

Despite concerns that the uncertainty caused by the imposition of higher tariffs on building material, the median price of a new home fell in June but that reflects buyer choices more than the cost of construction. Half of the new homes sold in June were priced under $300,000. In the last three months, about 48 percent of new homes sold had prices below $300,000 compared with 41 percent in the prior three months.

The changing preference among buyers for lower-priced homes could ultimately effect builders although builder confidence for July, according to the National Association of Home Builders remained at a strong 68 (out of 100) as an uptick in buyer traffic offset a dip in the outlook for home sales six months from now.

Residential construction jobs improved in June, according to the Bureau of Labor Statistics but the increase in those jobs was far weaker than it had been in April and May.

Hear Mark Lieberman on P.O.T.U.S. (Sirius-XM 124) Friday at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

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