New home sales fell more than expected in the US last month, the first of this week’s macro data out of the world’s largest economy showed.
The 5.6% drop took the annual pace to 679,000. The larger-than-expected decline was particularly notable given that September’s pace was revised meaningfully lower. Despite the downward revision, the prior month’s gain still stands as the most pronounced of 2023.
New construction remains supported by a still-acute dearth of resale inventory. Existing home sales, you’re reminded, have fallen in 19 of the past 21 months. People can’t buy what isn’t for sale. Used homes aren’t for sale. New ones are. Hence the disparity. Notwithstanding some “chop,” the trajectory of new home sales is higher.
The range of estimates for the headline new home sales print was 680,000 to 773,000 from 50 economists. The median was 721,000. Sales fell sharply in the Midwest and West.
A renewed rise in rates began to bite builder sentiment in August (when the NAHB gauge embarked on a fourth-month slide), but there just aren’t many options for would-be buyers — existing properties are scarce, and what little inventory there is remains quite expensive.
New construction can actually be cheaper depending on the locale, and builders may anyway offer incentives to make the math work. The median new home price in October was just $409,300, comparable to the median existing home price.
The near 18% YoY decline was the largest ever. As the figure shows, it’s not close.
I wouldn’t read too much into that. The new home sales series are erratic. Still, the drop was notable, particularly in the context of the weaker-than-forecast sales pace.
You’re reminded that existing home prices are rising again on a YoY basis, according to the NAR. Lagged updates on the national price gauges are due later this week.
Months’ supply of new homes was 7.8 in October, up from September. The total number of houses for sale rose to 439,000 last month.
Maybe if they hold interest rates where they are now it’ll eventually break the existing house sales jam but if they reduce interest rates, housing and inflation might go up again.
Any breakout by region?
I have no macro data for my area but I just got my RE tax bill last week and my tax and the home value it is based on are down 18% YoY. Looks familiar, yes? The end result is that my home value is probably about where it should be, right about at the median reported here, $415k. I do know that Jackson County, MO is currently in the eye of a monster hurricane of lawsuits, unhappy home owners and besieged politicians in conflict because a contractor hired to do our assessments did most of them right but many citizens have not been paying their fair share for at least a decade and this year these folks have been brought up to speed, some with assessments rising 500%. What a ride!
Homebuilders are building and selling cheaper houses – smaller houses, smaller lots. So not all of that price drop is like-for-like.
I’m reading new house size is down 10% and there’s more row houses, prefab houses, etc being built. https://theweek.com/housing-crisis/1026042/the-answer-to-rising-home-prices-smaller-homes
Seems like post-pandemic, a lot of goods (and perhaps services) might be in line for reverse hedonic price adjustments — while we casually term this trend either shrink-flation or greed-flation, we may be entering a longer term period where the only way to get nominal prices down (or affordability up) is to choose inferiority in size and quality. Left alone long enough, it could get to the point that reported inflation is always understated. You can already see the effect in so-called Dollar Stores that disguise much higher per unit pricing as “more affordable” to cash-stretched consumers.