October New Home Sales Report: Not Much to Be Thankful for

By Aaron Terrazas on 23 Nov 2016

• New home sales fell 1.9 percent in October to 563,000 units (SAAR), according to the Census Bureau.
• July, August, and September home sales were revised downward by a combined 34,000 units (SAAR).
• The number of new homes on the market increased 2.9 percent to 246,000 units (SAAR), its highest level since September 2009 but less than half its pre-crisis peak.

October new home sales fell 1.9 percent from September, to 563,000 units at a seasonally adjusted annual rate (SAAR), according to the U.S. Census Bureau, another month of anemic sales of new construction in the face of chronic inventory shortages and robust home buyer demand.

Additionally, sales for the previous three months were revised downward by a combined 34,000 units. August sales, initially reported at 609,000 units (SAAR) are now estimated at 567,000 units. Save for a brief show of strength in July, new home sales have struggled to break out of the 560,000-580,000 range, where they have essentially stalled since April (figure 1).

New home sales were up 17.8 percent in October from a year ago, but all of that annual increase occurred in the early part of the year. Unless we see strong new home sales in the coming winter months, the annual pace of growth will quickly slow going forward. In the longer perspective, new home sales remain 59 percent below their July 2005 peak (1.389 million units, SAAR) and 19 percent below the average number of new homes sold between 1985 and 1999 (695,000 units, SAAR).

October new home sales were strongest in the West, bucking the national trend and rising 8.8 percent from September, compared to declines of 3 percent in the South, 13.7 percent in the Midwest and 9.1 percent in the Northeast. Year-over-year, new home sales were up 28.7 percent in the West in October, 17.9 percent in the South and 8.6 percent in the Midwest. October new home sales were down 6.25 percent in the Northeast compared to a year ago.

The number of new homes on the market increased 2.9 percent from September and 9.3 percent from October 2015, to 246,000 units (SAAR), its highest level since September 2009 but still 57 percent below its July 2006 peak (572,000 units on the market, SAAR). On-market inventory has, in part, been held down by strong demand, which has pushed the median months on market for new homes (since completion) down to 3 months, just shy of the historic low of 2.9 months reported in December 2015.

The median seasonally-adjusted price of new homes sold in October was $310,300, up 1.3 percent over the month and up 2.1 percent over the year. The median sales price in October was just shy of the historic high of $321,900 reported in April 2016. The pace of price growth has slowed sharply in recent months. A year ago, median sales prices of newly built homes were growing at an average rate of 6.2 percent (12-month trailing moving average); now they are growing at an average rate of 3.6 percent.