September New Home Sales: Rapid Reaction

• September new home sales fell 5.5 percent from August, to 553,000 sales (seasonally adjusted), and were down 13.2 percent from a year ago, according to the U.S. Census Bureau.
• There were 327,000 new homes available for sale in September.
• The median sales price of new houses sold in September 2018 was $320,000, down 3.5 percent from a year earlier. The average sales price was $377,200.

Today's disappointing new home sales numbers can be partially attributed to September storms in the Southeast -- a region that plays an outsized role in new construction, relative to its population. But September's weakness cannot be attributed solely to adverse weather.

It's clear that home building faces a number of stubborn long-term headwinds, including the climbing costs of land, lumber and labor. While lumber costs retreated over the summer, they remain up nearly 20 percent over the past year and a half, and are not likely to abate as rebuilding in the Carolinas begins in earnest. Construction labor costs are rising as well.

Builders have not been building like they used to for some time now -- and with winter coming, they appear to be in retreat even from those historically low levels. The scourge of storms and higher construction costs aside, builders can read the early signs of a cooling housing market as well as anyone -- including a slowing in home value growth, rising mortgage rates, and an uptick in price cuts.

With an increasingly cloudy economic outlook over the next two years, builders may be growing weary of putting sticks in the ground that won’t be delivered to buyers for several months’ time. The longer the delivery horizon, the more blurred the outlook appears, and having only barely recovered from the last downturn, no one is eager to be swept away in the next economic storm brewing just beyond the horizon.