October New Home Sales Fall 9%

New home sales fell of sharply in October, hampered by rising interest rates and weather events in the South and West, HUD and the Census Bureau reported yesterday.

The report said new single-family sales in October fell by 8.9 percent to a seasonally adjusted annual rate of 544,000 from the revised September rate of 597,000; and by 12.0 percent from a year ago (618,000).

Sales fell in every region. In the South, sales fell by 7.7 percent in October to 313,000 units, seasonally annually adjusted, from 339,000 units in September and fell by 11.6 percent from a year ago. In the West, sales fell by 3.2 percent to 149,000 units in October from 154,000 in September and fell by 1.3 percent from a year ago.

In the Midwest, sales plunged by 22.1 percent in October to 60,000 units rom 77,000 units in September and fell by 17.6 percent from a year ago. In the East, sales fell by 18.5 percent to 22,000 units from 27,000 units in September and fell by nearly half (46.5 percent) from a year ago.

The median sales price of new houses sold in October 2018 was $309,700. The average sales price was $395,000. The seasonally adjusted estimate of new houses for sale at the end of October was 336,000, representing a supply of 7.4 months at the current sales rate.

“New home sales are running substantially behind last year’s pace; however, the September number was revised up substantially,” said Mike Fratantoni, chief economist with the Mortgage Bankers Association. “The hurricanes in the South and wildfires in the West likely impacted both month’s numbers, and continue to cloud the picture of the housing market’s overall strength. The strong job market and rising wages should continue to support housing demand, but the lack of affordability has been a major constraint this year. The increase in supply on the market will be a positive as we move into 2019.”

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said demand for new homes is “clearly weakening. Even with the upward revisions to the prior three months, new home sales show persistent weakness,” he said. “The slowdown is evident in nearly every key metric.”

Vitner said while higher mortgage rates have contributed to the slide, new sales began to weaken ahead of the rise in rates. “The culprit is diminishing affordability, particularly among first-time buyers,” he said. “The November [National Association of Home Builders/Wells Fargo] survey noted a sharp drop in buyer traffic. Buyer traffic is a good predictor of sales and housing starts, which both appear to be headed lower.”