October New Home Sales

New home sales fell in October according to the Census Bureau.  The 368,000 seasonally adjusted annualized rate is off slightly from September’s 369,000 units.  This is more significant than at first glance because September’s number was revised down by 20,000 units; August was also recalibrated and lost 2,000 sales.

The number of units sold was not the only weakness in the report.  For the second month in a row, the median and average prices fell.  October’s 4.2 percent slide in median price follows September’s decrease of 2.4 percent.  The average cost of a new home has fallen 3.2 percent and 4.2 percent in September and October respectively.  Year-over-year new home price gains have slowed considerably in the past few months as the 12-month gain in the median price has gone from 15.7 percent in August to just 5.7 percent in October; the year-over-year average price increase has decreased to 8.0 percent from 16.0 percent during the same period.

Inventories remain tight.  At the current sales pace, the supply would last 4.8 months, a slight uptick from September’s 4.7 months.  There are currently 147,000 (seasonally adjusted) new homes on the market.  The low inventory would normally stimulate builders to construct additional units, but the latest jobs report showed a loss of 20,000 construction jobs suggesting that builders are not very anxious to increase their output.  Housing may have found a bottom, but it is not yet exhibiting the qualities of a recovered segment of our economy.  (by C. Cox)