Don’t Be Fooled by New-Home Sales Plunge
Sales of newly built single-family homes dipped 12.8% in July, but homebuilders aren’t looking at the nosedive as bad news. So far this year, new-home sales are up 4.3% over last year, and builders say that’s progress. “Builder confidence continues to trend upward as lower interest rates provide for more favorable buying conditions,” says Greg Ugalde, chairman of the National Association of Home Builders.
New-home sales dropped to a seasonally adjusted annual rate of 635,000 units in July, the largest monthly decline in six years. A new-home sale is counted when a sales contract is signed or a deposit is accepted. “While we continue to see volatility in the monthly numbers, sales continue to trend in a slightly positive direction and are in line with our forecast,” says Robert Dietz, NAHB’s chief economist.
Low mortgage rates and the lowest unemployment rate in nearly 50 years is supporting demand for housing, economists say. However, land and labor shortages continue to constrain builders’ ability to add more housing in the lower price brackets. In July, the median sales price was $312,800, down 4.5% from $327,500 a year earlier. New-home inventory was at 337,000 units, which represents a 6.4-month supply.
On a year-to-date basis, new-home sales were 7.2% and 9.5% higher in the South and West, respectively. Meanwhile, sales fell last month on an annual basis by 15.4% and 12.4% in the Northeast and Midwest, respectively.
Source: National Association of Home Builders and “U.S. New-Home Sales Drop Sharply, Point to More Housing Weakness,” Reuters (Aug. 23, 2019)