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New Home Sales: Drag on Growth More Severe

October 26, 2022
Bottom Line:   New home sales fell nearly 11% in September. While better than expected, there were negative revisions to the surprisingly strong August reading. The trend in new home sales was volatile but still trending lower. Additionally, inventories were higher, bringing the months' supply metric to 9.2, a level only seen during and immediately after the financial crisis.
Separately, mortgage applications last week were lower again, led by declines in purchase applications, which are nearing the record lows seen in 2015, as applications for refinancings make fresh record lows.
Overall, housing's drag on economic growth continues to become more severe as the average 30-year fixed-rate rises to levels not seen in over a decade, hitting 7.42% last week.
New Home Sales
FELL by 10.9% to 603k, after the prior month was revised lower to 642k. This compared with market expectations for a decline to 580k, from the unrevised August level of 685k.  Sales are now 17.6% BELOW their year-ago level.
The Inventory of Homes Available for Sale ROSE by 1.1% to 462k. Inventories are now 23.2% ABOVE their year-ago.
Combined with the decline in sales, the Months' Supply increased to 9.2 months from 8.1 months. This is modestly ABOVE a normal level of 6.0 months.
Home Prices
ROSE with median prices 13.9% ABOVE their year-ago level and with average prices 10.0% ABOVE their year-ago level.
Article by Contingent Macro