New Home Sales Plunge in January

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales FELL 7.8 percent in January to 593,000 (seasonally Adjusted Annual Rate);
  • Unsold inventory ROSE 2.4 percent or 7,000 to 301,000
  • Median price of a new home DROPPED $13,700 from December to $323,000;
  • Year-year the median price of a new home was up $25,000 (2.5 percent)

Trends:

  • The pace of sales has fallen 14.4 percent ((percentage) in the last two months, steepest two-month decline since summer 2013;
  • The SAAR of new home sales has fallen month-month in five of the last seven months, but remains up year-year;
  • The inventory of unsold homes is at its highest level since March 2009 (311,000) the depth of the Great Recession;
  • The increase in the inventory of unsold homes rose for the was the steepest one-month climb since April 2006;
  • The dollar drop in the median price of a new single-family home was the largest in a year.

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

Image result for existing home sales

Despite continued confidence among builders, the sales pace of new single-family homes dropped again in February, by more than seven percent for the second straight month.

The decline in new home sales – contracts for new homes—may well have been expected as consumers, staggering under debt from holiday shopping might have been reluctant to take on new obligations. Indeed, contracts for the purchase of new homes have declined in six of the last 10 January reports.

This year may have been different because this was the first January in more than 30 years to be affected by a new tax law. And, the law which was signed by President Trump last December caps mortgage interest and property tax deductions reducing some of the tax benefits of homeownership. And, with the Federal Reserve keeping a watchful eye on payroll data, there is a strong likelihood the Federal Reserve will raise the benchmark fed funds rate when it meets next month to try to slow the economy before it gets too hot,

While the fed funds rate is not tied directly to mortgage rates, it does influence the cost of a home loan, more the updraft

The recent boot in jobs has not been accompanied by an increase in wages though take-home pay began to go up in February

The HUD-Census report o new home sales followed the report last week by the National Association of Realtors (NAR) that existing home sales fell in January for the second straight month. The NAR report covered closings of transactions entered into in November or December.

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