January New Home Sales: Second Sharp Drop in a Row
- New home sales fell sharply in January for the second consecutive month, declining 7.8 percent to 593,000 units (SAAR) from a year ago, according to the U.S. Census Bureau. Sales for the previous three months were revised upward.
- The number of new homes on the market increased by 7,000 units to 301,000 units (SAAR), the first month since March 2009 that there have been more than 300,000 new homes on the market.
- The median seasonally adjusted price of new homes sold in January fell 0.9 percent to $326,000 after touching an all-time high in November.
New home sales started 2018 on a disappointing note, falling 7.8 percent to 593,000 units at a seasonally adjusted annual rate (SAAR), according to the U.S. Census Bureau, the second consecutive month of contracting new home sales. Sales for October, November, and December were revised upward by a combined 42,000 units. Over the year, new home sales were down 1 percent.
If there was a silver lining in the January report, it was in the regional detail. While new home sales fell sharply – both from the prior month and the prior year – in the South and the Northeast, they increased in the West and the Midwest. The West in particular has been experiencing very tight inventory and is arguably the most inventory-constrained region. New home sales increased 1 percent from December in the West and are up 33.1 percent from last January. In the South they fell 14.2 percent from December and 10.9 percent from last year. The West now accounts for one-third of all new home sales nationwide, its highest share of new home sales since late 1994 and above its long-term historical average of 27 percent.
Inventory also was a strong spot in the report. The number of new homes on the market increased 2.4 percent, about 7,000 units, from December to 301,000 units (SAAR). It was the first month that new home inventory has been above the 300,000 threshold since May 2009. After holding steady for much of 2017, new inventory has now increased sharply for two consecutive months and is up 15.3 percent from a year ago. Similar to recent months, the increase in inventory was driven by homes for which construction had not yet started. Almost one in five (19 percent) new homes on the market is not yet under construction – above the historic average of 16 percent. The number of new homes on the market for which construction was ongoing fell by 1,000 units (SAAR), and the number for which construction had completed increased by 1,000 units (SAAR).
The median seasonally adjusted price of new homes sold in January retreated further from the all-time high reported in November, falling 0.9 percent over the month and 2.3 percent over the year to $326,000.