Sales of new homes slid 0.7% in September to an annualized rate of 701,000, according to the Census Bureau and the Department of Housing and Urban Development.
The September pace, falling from August’s downwardly revised rate of 706,000, was 15.5% higher than September 2018 when it was 607,000.
New home sales were underwhelming in September, said TIAA Bank EVP John Pataky. The incentive of low rates was not quite as powerful in bringing buyers into the new home market this month, he said.
“While this data was not positive, it is not yet enough to suggest that consumer health is flagging, so as long as other indicators such as wages and employment remain solid and consumer demand holds up, the housing market will continue to hold the line,” Pataky said.
The seasonally adjusted estimate of new homes for sale by the end of September was 321,000. This represents a supply of 5.5 months at the current sales rate, holding steady from the previous month.
The median sales price of new homes was $362,700, down 6.13% from a year earlier.
The typical sale price of a newly built home dipped below $300,000 for the first time in more than two years, a sign that builders are finding ways to meet demand from the all-important entry-level segment of the market, said Zillow Economist Matthew Speakman.
“Mortgage rates ticked up from long-term lows in September amid growing economic uncertainty, but demand for new homes remains healthy and 2019 sales are on pace to easily exceed 2018 numbers,” Speakman said. “Builders remain busy and upbeat that buyers will continue to pick up what they’re laying down for at least the next six months.”
The latest Housing Market Index, which gauges homebuilder market sentiment, indicates that homebuilder confidence rose to 67 points in September, marking the highest reading since October of last year.
Solid household formations and attractive mortgage rates are contributing to a positive builder outlook,” NAHB Chief Economist Robert Dietz said. “However, builders are expressing growing concerns regarding uncertainty stemming from the trade dispute with China.”
Nevertheless, the Department of Housing and Urban Development and the Department of Commerce reported that housing starts dropped 9.4% in September to a seasonally adjusted annual rate of 1.256 million.
The start of new home construction hit a post-recession peak last month, so it’s no surprise that it has retreated,” said Holden Lewis, an expert at Nerdwallet. “Although homes are being built with vigor and we are far from a housing slump, there is something to worry about: All this construction isn’t doing much to increase the supply of homes that are affordable to first-time buyers, who are still left with few purchasing options and high prices.”