 | New Single-Family Home Sales Declined 11.5% in September |
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| Posted Under: Data Watch • Home Starts • Housing |
Implications: After surging in August, new home sales took a breather in September, as higher prices may be making some buyers uneasy. Sales declined 11.5% in September to a 468,000 annual rate, well below the forecast of every economics group, but are still up 2% in the past year. The important thing to remember when looking at today's report is that monthly data are volatile and what really matters is the trend. Even with September's large drop, new home sales over the past year have averaged the fastest pace going back to 2008. Largely as a result of the drop in sales, the months' supply of homes for sale grew to 5.8 months in September from 4.9 in August. However, the inventory of new homes for sale also rose as well, by 9,000 units. In other words, higher prices are incentivizing homebuilders to construct more homes, just like you'd expect in a free market. This should have two benefits. First, it will address the issue of thin supply, which should help boost sales in the year ahead. Second, larger inventories should help dampen price gains. New home sales are still depressed relative to history. We think there are a few reasons for this. First, a larger share of the population is renting. Second, buyers have shifted slightly from single-family homes, which are counted in the new home sales data, to multi-family homes (think condos in cities), which are not counted in this report. Third, although we are seeing a thaw, financing is still more difficult than it has been in the past. The trend is what matters, though, and the trend in sales has been up and should stay that way in the year ahead.
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