• We expect new home sales to fall to about 488,000 units (SAAR) in September, down 3.1 percent from August.
• Sales likely retreated from their near-record increase in August. Rising new home prices have also held back sales.
• We estimate that the median sales price of new home was between $279,000 and $282,000 in September.

After big gains in August, Zillow expects Friday’s September new home sales data to fall to a seasonally adjusted annual rate (SAAR) of about 488,000 units, down 3.1 percent from August.

New home sales in August totaled 504,000 units (SAAR), up 18.0 percent from July, and 33 percent year-over-year. The increase over July was the biggest one-month jump in more than 20 years, according to reports.

Background

Sales of new homes have been slow to recover after plummeting more than 80 percent during the recession, from 1.39 million units (SAAR) in July 2005 to 270,000 units (SAAR) in February 2011. Although new home sales have increased modestly since then, they remain extremely low. Before the recession started in December 2007, new home sales had been below their current level in just 29 of the 360 months—8 percent of the time—over the previous 30 years.

Forecast

Our new home sales forecast uses two models, a structural model and a historical model. The structural model is more sensitive to the assumptions we make about the state of the economy, but can provide greater insight into the forces driving new home sales.

The historical model suggests new home sales will total 488,000 units (SAAR) in September, down 3.1 percent from August, while the structural model suggests new home sales will total between 492,000 and 495,000 units (SAAR), down between 2.4 percent and 1.8 percent from August.

New home sales have climbed as the share of homes in foreclosure has declined—home buyers often view foreclosure re-sales and new homes as close substitutes—but the median price of new homes has climbed, posing a formidable headwind to sales volume. A near-record increase in new home sales in August suggest that sales likely retreated somewhat in September.[1]

As an input to our forecast of new home sales, we also estimate the median price of new homes sold. We estimate that the median sales price of new home was between $279,000 and $282,000 in September 2014.

More information about the models and assumptions underlying our forecast is available on our website.

[1] Although housing starts were strong in the spring, the positive effect of these starts on September new home sales is overshadowed in the model by August’s very strong sales data.