 | New Single-Family Home Sales Declined 0.7% in September to a 701,000 Annual Rate |
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| Posted Under: Data Watch • Home Sales |
Implications: Following a strong gain in August, new home sales took a breather in September, falling 0.7%. However, at a 701,000 annual pace, sales are now up a healthy 15.5% in the past year. And, more importantly, despite the small decline in September, new home sales have now fully reversed the decline in the 12-month sales average, which once again sits at a post-recession high. One of the key signals the US is not headed for recession is coming from the housing market. New home sales normally run around 70% of single-family housing starts, but have now exceeded that threshold for each of the past eight months, hitting 76.3% in September, and signaling plenty of appetite for new homes. In other words, home construction needs to pick up to keep pace with consumers' appetites for new homes. In fact, home building should be a tailwind for GDP growth in the year ahead, as opposed to the drag on growth that residential construction has been for the past six quarters (through the second quarter of 2019). The good news is that builders are beginning to respond, with the number of new single-family housing starts sitting at a post-recession high in Q3. As those new properties are finished the sustained decline in inventories we have seen since January should begin to reverse. Affordability has been playing a big role in the recent rebound in sales, with mortgage rates having fallen roughly 100 basis points since peaking in November. Meanwhile, new home prices have moderated, with six of the nine months in 2019 posting declines on a year-over-year basis. Overall, the fundamentals signal growth in home sales over the medium to long term. Relative to population, the number of new home sales remains well below where it should be. Bottom line, we expect sales in 2019 to outpace 2018, continuing the upward trend. In other recent news on the housing sector, the FHFA index, which measures prices for homes financed with conforming mortgages, increased 0.2% in August, and is up 4.6% from a year ago, a deceleration from the 6.4% gain in the year ending in August 2018. Expect more of the same in the year ahead, continued home price gains but at a slower pace and with the gains tilted toward lower tax states.
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