New Home Sales: Surprise Decline

Bottom Line: New home sales fell In October, substantially missing expectations for gains and a resumption of trend. Most of the miss was due to declines in the Northeast and Midwest, suggesting there was little impact from Hurricane Matthew. Sales over the last three months have averaged 568K and are 1.2% below the 6 month average of 575K. While not yet a clear turn in trend, the steady gains are waning. The months supply rose modestly as sales fell and inventories rose. Median new home prices are still up over the last year but the average home price is lower. While existing home sales earlier this week showed strength, this new home sales data (based on contract signings rather than closings like existing home sales reports) reveals the potential for some weakness going forward. New Home Sales FELL by 1.9% to 563k, after the prior month was revised lower to 574k. This compared with market expectations for a decline to 590k, from the unrevised September level of 593k. The trend is rising and sales are now 17.8% ABOVE their year ago level, -- but they are still 59.5% BELOW their July 2005 peak. The Inventory of Homes Available for Sale ROSE by 2.9% to 246k. Inventories are now 9.3% ABOVE their year ago level but still 57.0% BELOW their July 2006 peak level. Combined with the decline in sales, the Months' Supply increased to 5.2 months from 5.0 months. This is modestly BELOW a normal level of 6.0 months and well BELOW its peak of 12.2 in January 2009. Home Prices were MIXED with median prices 1.9% ABOVE their year ago level with average prices 3.3% BELOW their year ago level.