New home sales held up better than expected in the US last month, data out Wednesday suggested.
Sales dropped 10.9% from August, to a 603,000 annual rate. Consensus expected a much larger decline.
Figures for June, July and August were revised lower, higher and lower, respectively. August’s seemingly anomalous 29% surge was smaller after revisions, but still sticks out. Overall, the annual pace is subdued compared to the pandemic frenzy, but hardly depressed (figure below).
According to MBA data released shortly before the government’s sales figures, mortgage rates rose a tenth week, with the 30-year fixed topping 7% for the first time in decades.
“The ongoing trend of rising mortgage rates continues to depress mortgage application activity, which remained at its slowest pace since 1997,” Joel Kan, MBA’s Vice President and Deputy Chief Economist, said, adding that purchase applications fell another 2% to the slowest pace in half a decade, down 40% YoY.
Median prices for new homes actually rose in September, and the annual pace reaccelerated after falling into the single digits the prior month. The median new home price last month was $470,600, the Census Bureau said. That was up almost 14% on a 12-month basis (figure below).
The average price dropped to “just” $517,700 from $529,000 the prior month. The average is obviously skewed, but setting aside prob and stats 101 in the interest of tragicomedy, there’s something very sad and very absurd about the idea of an “average” American family staring at a half-million dollar price tag for a new construction with mortgage rates at 7.16% (according to the MBA index).
On the bright side, months’ supply did rise sharply, to 9.2. As a reminder, the low was 3.3 in August of 2020. The series is far too noisy to be amenable to extrapolation, but the MoM increase was, in absolute terms, among the largest on record. We’ve seen a trio of >1-month increases in the months’ supply series this year, and one 2-month decrease (coinciding with August’s freakish jump in sales).
New home sales are on pace for 661,000 this year, down more than 100,000 from 2021’s total.
Wednesday’s data came on the heels of price figures for August which showed large MoM declines on two key gauges, and an unprecedented deceleration in the annual rate of price appreciation.
Anecdotally, I was perusing listings in North Carolina last week, when I came across a very attractive property which, notwithstanding the locale (a county that, according to one agent, is proud to call itself affordable), seemed too cheap to be true. As it turns out, my perception is warped by resort-skewed prices in and around my current residence. Upon further inspection, it turns out that the North Carolina property was actually very expensive. Someone purchased it earlier this year for $250,000 less than the current list.
Although the buyer’s agent with whom I spoke didn’t say this explicitly, it appeared someone might’ve mistimed the market, buying at the literal peak in hopes of flipping it for a tidy gain within months. “It’s probably not gonna sell,” the agent remarked, somewhat disinterestedly. “No, probably not,” I said, adding that while it still looked like a bargain to me, I wasn’t interested in bailing out Johnny-come-too-lately’s foray into house-flipping.
Try this, which has worked for me.
Make an “all cash”, 30 day close at a “fair” price offer- even if way under asking. Using Zillow “recently sold” sales info- put a little excel schedule together that justifies your offer and give it to the broker.
You might be surprised. Or they might have the broker follow up with you again in about 30-45 days time.
YOLO.
In writing, of course!
H-Man, there was an article a few months back about every Tom, Sally and Harry buying North Carolina property in the mountains to convert to VBRO rentals and shadow money was flowing freely to finance those deals based upon the expected rental stream. Properties were selling like hot cakes and now, it appears, the music has stopped.