New Home Sales: Sharp Decline, Upward Revisions Fail To Boost Trend
November 28, 2018
Bottom Line: Bottom Line: New Home sales fell sharply and were well below expectations even considering a sharp upward revision to September data. Declines were mostly balanced across all regions of the country. Prices are starting to follow the overall weakness in housing sales with median prices for new homes now down about 1% versus last year. Inventories are moving higher with months supply jumping over 7 in October and averaging over the "normal" 6 month level for much of the last half of 2018. Separately, 30-year mortgage rates retreated modestly in late November, aiding a modest rebound in the purchase index. That said, there were heavy seasonal adjustments due to Thanksgiving holiday, and activity in the first few weeks of December will be critical to determining if the downtrend can stabilize. For now purchase applications are in a downtrend and refinancing remains extremely muted, continuing to confirm the weaker sales stats across both new and existing homes. New Home Sales FELL by 8.9% to 544k, after the prior month was revised higher to 597k. This compared with market expectations for an increase to 575k, from the unrevised September level of 553k. Sales are now 12.0% BELOW their year ago level, -- and they are still 60.8% BELOW their July 2005 peak. The Inventory of Homes Available for Sale ROSE by 4.3% to 336k. Inventories are now 17.5% ABOVE their year ago level but still 41.3% BELOW their July 2006 peak level. Combined with the decline in sales, the Months' Supply increased to 7.4 months from 6.5 months. This is modestly ABOVE 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 3.1% BELOW their year ago level and with average prices 0.3% ABOVE their year ago level.
Article by Contingent Macro Advisors