New Home Sales Dive 8.9% in October, Down 12.0% From Year Ago

Upward revisions in Aug and Sep were not enough to offset a plunge in new home sales below any economist's forecast.

New Home Sales Defy Expectations and Retreat in October

Mortgage News Daily comments New Home Sales Defy Expectations and Retreat in October.

New home sales were expected to make a strong showing in October; the consensus of analysts polled by Econoday was for a sharp increase from the September level of 553,000 to 575,000 units. Instead, there was a steep decline, amplified by a major upward revision to the September estimate.

The U.S. Census Bureau and the Department of Housing and Urban Development estimate that October sales of newly constructed homes were at a seasonally adjusted annual rate of 544,000 units, falling well below the lowest of analysts' projections. The result was a decline of 8.9 percent from the restated September rate, an upward revision to 597,000 units.

The September revision gave new home sales their first uptick since May. With that single exception sales have declined steadily from the 653,000 estimate for that month and the October number lags the 618,000 sales pace in October 2017 by 12 percent.

By Region

  • Northeast: Down 18.5 percent for the month and 46.3 percent compared to a year ago.
  • Midwest: Down 22.1 percent for the month and 16.7 percent compared to a year ago.
  • South: Down 7.7 percent for the month and 11.6 percent compared to a year ago.
  • West Down 3.2 percent for the month and 1.3 percent compared to a year ago

Peak

New home sales peaked at 712,000 units in November of 2017 on a hurricane rebuilding surge.

Sales have trended lower for most of 2018. The year-over-year numbers next month will be grim

Supply

At the end of the reporting period there were an estimated 336,000 homes for sale, an increase of 17.5 percent in the inventory year-over-year. This is an estimated 7.4-month supply at the current rate, almost a month more than was estimated for the September inventory. Only 74,000 of the available homes were ready for occupancy.

Oops. It appears builders were more than a bit too optimistic in building homes that no one wants or can afford.

Mike "Mish" Shedlock

Comments (10)
No. 1-6
KidHorn
KidHorn

When interest rates go up faster than prices go down for a heavily leveraged purchase, this is what happens.

Bam_Man
Bam_Man

And this is obviously bullish for the stock "market". Bad news is good news once again, as the Fed will raise interest rates no more than another 25 bps before pausing and probably marking the end of this cycle.

pbml
pbml

I don't know whether to commend the shrewdness of the Republican Party or condemn the ignorance of the "analysts." One of the stealth impacts of this year's tax bill was the fact that in essentially eliminated all the tax benefits associated with home purchases by the middle-class. Tax benefits have always been a major incentive for home purchases; yet nowhere is it mentioned in the citations (or anywhere else, for that matter).

Ted R
Ted R

DEFLATION

Ted R
Ted R

You make a valid point.