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New-home sales surge in September

A new round of housing data this week came in surprisingly strong, despite the the string of devastating hurricanes that wreaked havoc in Texas and the Gulf Coast.

Sales of new homes hit a near 10-year high in September, reaching an annualized pace of 667,000, the U.S. Census Bureau reported. That pace jumped up nearly 19 percent above the August rate of 561,000 and was up 17 percent year over year.

homesalesdata“Overall, I would say, it is good news, a step in the right direction,” said George Ratiu, managing director of housing and commercial research for the National Association of Realtors (NAR). “But we still have quite a ways to go.”

New-home sales represent just a fraction of the overall housing market (existing-home sales are on pace to hit 5.3 million units), but are watched closely as a measure of economic activity and expanding home inventory. Typically, the buyers of new homes are move-up buyers. The national median price of a new home was $319,700 in September, which compares to an estimated $245,100 median price for an existing home.

Ratiu said the pace of new-home sales still lags significantly that of new-household formations.

“If anything, just to keep up with the pace of household formation, you would want new-home sales to be close to that million-unit mark per year,” Ratiu said. “We are still over 300,000 units short.”

Ratiu also noted that one caveat in the new-home sales report is that the numbers are based on a relatively small survey sample, and subject to monthly swings and wide margins of error.

“From my perspective, we have 12 of these in a year. This is a monthly read,” Ratiu said.

Pending sales hold steady

Pending sales of existing homes, a measure of signed contract activity, were flat in September. The NAR index in September was at 106, identical to August. Contract activity was down only in the South region, however, which was ravaged by hurricanes Harvey and Irma in late August and early September. The overall index was down 3.5 percent compared to the September 2016 level, though and has fallen year over year for five out of six months.

Contract activity also is trending down in all regions. NAR has blamed the drop in pending sales over last year on a shortage of homes in affordable price ranges.

Ratiu said the September reading of pending sales beat expectations. It would be expected to decline over the August level as a consequence of the storm damage in the Gulf region.

“On the monthly basis, the South was the only region that registered a drop,” Ratiu said. “The Northeast, Midwest and West all had modest increases. Florida and Texas mostly drove that decline.”

Ratiu said pending-sales readings tend to decline in September.

“The fact that, even despite hurricanes, the index remained at the same pace that it had in August was a silver lining,” Ratiu said. 


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