New Home Sales Hit 2017 Low in August

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Pace of contracts for new home sales FELL 3.4 percent in August to 560,000 (seasonally Adjusted Annual Rate), the weakest since last December;
  • Unsold inventory ROSE 10,000 to 284,000 – highest level since May 2009
  • Sales pace for July was revised up 9,000 to 580,000 but the sales rate for June was revised down 16,000 to 614,000;
  • With lower August sales rate, months’ supply of new homes for sale ROSE to 6.1 months in August, highest since January 2016;
  • Median price of a new home FELL $19,700 from July to $300,200;
  • Year-year the median price of a new home was up $1,300 (0.4 percent)

 

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New home sales continued to send bad news about the housing market as the Census Bureau and Department of Housing and Urban Development reported sales (contracts) of new dropped for the second straight month to 560,000. Sales have fallen 8.8 percent in the last two months.

The average rate for a 30-year fixed rate mortgage in August, according to the weekly Freddie Mac survey, was 3,88 percent, down from 3.97 percent, in July.

The decline in contracts for sale of new homes came as builder confidence slipped at the beginning of September and housing starts dropped. The weakness in housing activity will likely be exacerbated in the aftermath of Hurricanes Harvey and Irma as building material and construction workers are diverted to rebuilding efforts and away from new home building.

Perhaps the more troubling piece of data in the new home sales report was the spike in unsold inventory. The 10,000 month-month jump was the largest since July 2013 and followed a steady decline in buyer traffic at model homes as indicated by the National Association of Home Builders’ monthly survey. It flows logically that an increase in inventory and drop in new home sales should result in a slowdown in building which could show up in weaker construction employment numbers.

The number of residential construction jobs rose 13,000 in August – the largest month-month increase since February –- to the highest level since September 2008, but home builders might be hard-pressed to sustain that given the continued increase in the inventory of unsold homes and declining sales..

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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