New Home Sales Fall for 3rd Straight Month

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales EDGED DOWN 0.4 percent in December to a seasonally adjusted annual rate (SAAR) of 694,000 but was up 23 percent (130,000) in the last year;
  • The November sales pace originally reported as 719,000 was REVISED DOWN to 697,000
  • The inventory of unsold new homes ROSE 5,000 in December to 327,000;
  • The months’ supply of new homes for sale ROSE to 5.7 in December from 5.5 in November;
  • Median price of a new home RECOVERED to $331,400 in December, up $10,500 after falling $2,500 in November;
  • Year-year the median price of a new home is UP 0.5 percent or $1,700.

Trends:

  • The sales pace for new single-family homes fell for the third straight month
  • The month-month increase in homes for sale was the largest in a year (up 12,000 in December 2018) but the inventory was 19,000 less than December 2018;
  • The number of homes for sale has fallen in eight of the last 12 months.

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

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Sales of new single-family homes continued to slip and slide in December, dropping for the third straight month. the Census Bureau and Department of Housing and Urban Development reported Monday. November’s sharp increase in the sales pace was revised down.

Only a sharp surge of new home sales in the West – homes built to replace those destroyed during summer wildfires – prevented the sales data from marking a complete wipeout in sales. (The government report tallies contracts for sale, not closings.) The pace of sales in the West nearly doubled to 241,000 in December from 121,00 a year ago.

A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the December reading of 694,000 units is the number of homes that would sell if this pace continued for the next 12 months.

In a report on existing home sale closings, the National Association of Realtors reported a 190,000 or 3.6 percent increase for December with the pace of existing home sales reaching the highest level since March 2018, 21 months.

But new home sales, though up from a year ago, continue to struggle despite builder confidence remaining at high levels. The National Association of Home Builders reported last week an uptick in multi-family construction following a preference by younger buyers for apartments closer to where they work.

New home sales though have been helped by mortgage rates which fell to and have remained near historic lows., offsetting the recent increase in prices.

According to Freddie Mac, the average rate for a 30-year fixed rate loan in December was 3.72 percent, up just a smidgen for 3.70 percent in November.

The challenges to home sales have been slowly disappearing but not enough to anticipate a sharp uptick in sales of new or existing homes. That said, the inventory of existing homes for sale fell to an all-time low in December which could drive more potential buyers to consider new homes.

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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