New Home Sales See Major Slowdown in September

September’s sales were 603,000 on an annualized pace following an unexpected gain in August — revised at 677,000 — and were 17.6% below the year-ago estimate of 732,000, the government data showed.

The numbers reflect a slide in housing demand that’s resulted from the Fed’s ongoing uphill battle against the worst inflation in a generation. Decade-high mortgage rates have made houses unaffordable and sidelined prospective buyers.

But so far, that hasn’t shown up in the price of new homes, the report said. The median price for a new home surged 13.6% year-on-year to $436,800 from a revised $466,300 in July. The average sales price was $517,700 last month.

“New home sales are down 14.3% on a year-to-date basis compared to 2021,” said Robert Dietz, the National Association of Home Builders’ (NAHB) chief economist, “Moreover, sales are now down 1.9% on the same basis compared to 2019 levels that were prior to the Covid-related changes to interest rates.”

There were 462,000 new homes for sale as of the end of the month, the most since 2008, though the overwhelming majority remain under construction or not yet started, according to the NAHB. At the current sales pace, it would take 9.2 months to exhaust the supply of new homes, compared with 8.1 months in August and 6.1 months one year ago.

Confidence in the industry continues to deteriorate, with builders’ sentiment falling for the tenth consecutive month in October to a reading of 38. A number below 50 is considered negative.

As a result, builders are pulling back on new construction. Permitting for single-family homes fell in September, down 8.1% to an annualized rate of 1.44 million units, said the Census Bureau.

By David Schollaert, David@SteelMarketUpdate.com