New Home Sales Improve in August As Median Price Drops

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales ROSE5 percent in August to 627,000 (Seasonally Adjusted Annual Rate);
  • The sales pace for July was REVISED DOWN 9,000, the slowest sales pace since August 2017 (558,000); without the revision, the July month-month increase would have been 1.9 percent;
  • Unsold inventory INCREASED 5,000 in August to 318,000 but the inventory for July was revised downward to 313,000 from 315,000;
  • The months’ supply of new homes for sale FELL to 6.1 in August from 6.2 in July
  • Median price of a new home FELL $7,9 00, 2.4 percent, from June to $321,200;
  • Year-year the median price of a new home was UP $6,000 (1.9 percent)

Trends:

  • New home sales in August were UP7percent from August 2017, the largest year-year jump since December;
  • The median price of a new single-family home has DROPPED month-month in six of the eight months this year;
  • The inventory of new homes for sale INCREASED for the fifth straight month

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

Image result for home sales

Builders may have finally figured out how to boost lagging sales of new homes: lower the price. New home sales, or as the government reports them contracts for the sale of new homes, jumped 21,000 in August (SAAR), the strongest increase since February when, coincidentally, the median price of a new home fell $2,400.

But the Census/HUD report didn’t assuage realtors who were still feeling the impact of last week’s report that the pace of existing home sales in August was flat to July – even though the median price of an existing single-family home fell 1.7 percent ($4,600) – the second consecutive month-month decline.

The inventory of existing homes for sale was also flat in August and the months’ supply of homes for sale remained at 4.3. the highest it’s been since October 2016.

The standard explanation the NAR has offered for sluggish sales has been a lack of inventory but with the inventory at 4.3 months’ supply for three straight months, that explanation is starting to wear thin.

Sales – of new, not existing — homes could begin to pick up as the Carolinas and other affected areas dry out from recent storms and realize must replace destroyed by Hurricane Florence. That, of course, could perversely be good news for builders.

Beyond the month-month gyrations of new and existing home sales, the longer-term trends remain discouraging.  New home sales have averaged 618,000 over the last three months, down sharply from 653,000 in the prior three months and 661,000 in the previous three months. The two reports are not precisely comparable: the government data measures contracts for sale while the NAR reports on closed transaction. The NAR’s pendign home sales (contracts) will be released next week.

Existing home sales averaged 5.35 million in the last three months compared with 5.48 million in the previous three months and 5.49 million in the three months before that.

Among the factors conspiring to tamp down home sales: stagnant wages despite a “seller’s” job market; mortgage interest rates creeping up (3.83 percent for a 30-year fixed rate loan in September 2017 to 4.65 percent this year and the still-present student debt load of borrowers in the prime home-buying age cohort.

That difference in rates would increase the monthly payment on a $300,000, 30-year loan from $1401.30 to $1,545.44, an increase of about 10.3 percent over a period when weekly earnings have gone up just about 3 percent.

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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