New Home Sales Hit 10-year High

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Pace of contracts for new home sales SURGED 28.9 percent in September to 667,000 (seasonally Adjusted Annual Rate), the largest month-month increase in more than 25 years (Jan 1992: 21.1 percent)
  • Unsold inventory WAS FLAT to August at 179,000
  • Sales pace for August was revised up 1,000 to 561,000, with the largest revision, up 15,000, coming in the hurricane-afflicted South;
  • With faster September sales rate, months’ supply of new homes for sale FELL back 5.0 percent, the lowest since March;
  • Median price of a new home ROSE $15,900 from August to $319,700;
  • Year-year the median price of a new home was up $4,900 (1.6 percent)

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Making up for ground lost to two mammoth storms, the pace new home sales spurted in September to 667,000, the fastest pace in 10 years (October 2007: 727,000) the Census Bureau and Department of Housing and Urban Development reported.

The September sales increase included a 26 percent increase in sale in the South which was ravaged by Hurricanes Harvey and Irma.

At the same time, the median price of a new home rose 15.9 percent or $15,900 to $319,700, bouncing back from a 6.1 percent drop in August.

The government report tracks contracts for sale of newly built homes. The sales report from the National Association of Realtors, which reflects resales of homes, showed a modest (0.7 percent) gain in September. The NAR report on contracts for sale (pending home sales) is scheduled for release next week.

The average rate for a 30-year fixed rate mortgage, according to the weekly Freddie Mac survey, dropped from 3.88 percent in August to 3.81 percent in September, the lowest this year.

Some of the increase in September sales may be attributed to the storms as families reinvested insurance proceeds from destroyed homes.

The strong September sales pace will exacerbate home building pressures as inventories are depleted and builders face higher prices for both materials and labor to build new homes. Both housing permits and starts ticked down in September according to a government report last week. Starts of new single-family homes fell 4.6 percent, the sharpest decline in almost a year. Completions of new single-family homes rose 4.6 percent suggesting buyers are snapping up new homes as soon as they are completed.

Indeed, the “gap” between new home sales and completions contracted in September to its narrowest since March 2015. In September 781,000, single family homes were completed 114,000 than were sold. Completions outpaced sales by 262,000 in July.

The “gap,” while not halting the inventory growth certainly slows it providing an incentive for increased building activity.

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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