New home sales retreated in October, according to the latest report from the Census Bureau and the Department of Housing and Urban Development.
Sales of new single-family houses decreased 8.9% to 544,000 in October, down from September’s revised rate of 597,000 and 12% below sales made in October 2017.
TIAA Bank Executive Vice President John Pataky said after another disappointing report, it’s clear we are well into a correction period for the new home market.
“High prices and rising rates are continuing to take their toll on this segment, which is particularly sensitive to changes in these metrics,” Pataky said. “Additionally, declining homebuilder confidence is only exacerbating the troubles for the new home market on the supply side.”
So, what does that mean for sales in 2019? Well, Pataky claims trouble lies ahead.
“Next year, we will likely see a tussle between price moderation creating additional demand and rising rates having the opposite effect,” Pataky said. “No matter which trend wins out, we expect the new home market to continue to face headwinds in 2019.”
The median sales price of new homes sold was $309,700 and the average sales price was $395,000.
The seasonally adjusted estimate of new homes for sale by the end of the month was 336,000 in October, representing a supply of 7.4 months at the current sales rate.
Realtor.com Chief Economist Danielle Hale said new home sales is a good measure for the overall health of the housing economy.
“If tomorrow's pending home sales data confirms the decrease we saw today, that would be a strong indication of what we could see in existing home sales in the month or two ahead,” Hale said.
“While numbers of new homes for sale across various stages of construction are increasing, the median number of months that a completed home sits on the market is at an all-time low at 2.7 months,” Hale continued. “This suggests that even as the supply of new homes relative to recent sales is increasing, finished homes are generally selling quickly. This is a strong counterpoint to those who worry that slowing home sales point to a new housing bubble.”