New home sales declined in September, according to the latest report from the Census Bureau and the Department of Housing and Urban Development.
Sales of new single-family houses decreased 5.5% to 553,000 in September, down from August’s revised rate of 585,000 and 13.2% below sales made in September 2017.
Realtor.com Chief Economist Danielle Hale said rising prices and mortgage rates knocked out some buyers and spooked others into waiting to see if mortgage rates reverse or prices decline -- even though both of these outcomes are unlikely.
“Earlier estimates for June through August were revised lower, which means that there were fewer new home sales than we previously thought in these months,” Hale said. “Instead of turning around in August as first estimated, new home sales continued slowing, a trajectory that hasn’t changed in September.”
"Instead of taking advantage of reduced competition in the fall, buyers seem to be hibernating, marking an earlier end to the home buying season than we’ve seen in recent hotly competitive years," Hale concluded.
The median sales price of new homes sold was $320,200 and the average sales price was $377,200.
Zillow Senior Economist Aaron Terrazas said today’s disappointing new home sales numbers can be partially attributed to September storms in the Southeast, as this region plays an outsized role in new construction.
However, Terrazas said September’s weakness cannot solely be attributed to adverse weather.
The seasonally adjusted estimate of new homes for sale by the end of the month was 327,000 in September, representing a supply of 7.1 months at the current sales rate.
“It’s clear that home building faces a number of stubborn long-term headwinds, including the climbing costs of land, lumber and labor,” Terrazas continued. “While lumber costs retreated over the summer, they remain up nearly 20% 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,” Terrazas said. “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.”
Terrazas said 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.
“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,” Terrazas concluded.