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New-home sales plunge in September

Newly released government data on new-home sales provides more evidence that the housing market has hit a bump.

New-home sales dropped for the fourth consecutive month in September, falling to a nearly two-year low, the U.S. Census Bureau reported on Wednesday.

newsalesThe annualized pace of sales was 553,000, down 5.5 percent compared to August and 13.2 percent year over year. It is the second consecutive month that the annualized pace has been below the 600,000-unit threshold. New-home sales hit a high-water mark of 712,000 in November 2017.

The monthly sales decline was driven by a massive decrease in the Northeast (down 40.6 percent from August) and West (down 12 percent) regions. On a year-over-year basis, new-home sales dropped significantly in the Northeast (down 51.3 percent), South (down 11.4 percent) and West (down 15.8 percent).

The Midwest region, however, saw a monthly gain of 6.9 percent and an annualized gain of 4.1 percent.

One caveat about the regional new-home sales data, however, is that it carries a wide margin of error and could be significantly revised by the census bureau.

The flagging numbers ran counter to the latest surveys on homebuilder confidence that suggest strong buyer demand for new homes. Builder confidence in current and future sales has been running high, and more builders were positive about consumer traffic, according to the National Association of Home Builders’ October builder-confidence survey.

The lower new-home sales numbers were consistent with a general slowdown in the market, however. Last week, the National Association of Realtors reported that existing-home sales in September recorded an annual pace of 5.15 million, the slowest rate in nearly three years.  

Joel Kan, associate vice president of economic and industry forecasting for the Mortgage Bankers Association, said Hurricane Florence likely disrupted new-home sales in the South region. Kan said the overall pace of sales experienced the first annual decline since August 2017, and it was the largest annual drop since April 2011.

“Sales activity last month was impacted heavily by declines in the South and West, with Hurricane Florence likely driving the South’s numbers,” Kan said. “As far as the West is concerned, we have started to see some moderation in home price appreciation in recent months, and this is a further sign that certain markets may be starting to cool off because of affordability challenges."

The median sales price of new homes sold in September was $320,000, and the average sales price was $377,200, the census bureau reported.


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