New Home Sales Defy Expectations and Retreat in October

New home sales were expected to make a strong showing in October; the consensus of analysts polled by Econoday was for a sharp increase from the September level of 553,000 to 575,000 units.  Instead, there was a steep decline, amplified by a major upward revision to the September estimate.

The U.S. Census Bureau and the Department of Housing and Urban Development estimate that October sales of newly constructed homes were at a seasonally adjusted annual rate of 544,000 units, falling well below the lowest of analysts' projections.  The result was a decline of 8.9 percent from the restated September rate, an upward revision to 597,000 units. 

The September revision gave new home sales their first uptick since May. With that single exception sales have declined steadily from the 653,000 estimate for that month and the October number lags the 618,000 sales pace in October 2017 by 12 percent.

On a non-adjusted basis there were 42,000 homes sold during October compared to 45,000 in September.  It was the slowest month for sales thus far in 2018.  Year-to-date sales are estimated at 532,000, a 2.8 percent increase over the 518,000 sales during the first 10 months of last year.

The median price of a home sold in October was $309,700 and the average was $395,000.  The respective sales prices in October 2017 were $319,500 and $394,000.

The decline in new home sales was felt to varying degrees in all regions of the country. They were down 18.5 percent from September in the Northeast and 46.3 percent compared to a year earlier.  The Midwest posted downturns of 22.1 percent and 16.7 percent for the two earlier periods.  Sales in the South declined by 7.7 percent for the month and 11.6 percent on an annual basis, and the West saw losses of 3.2 percent and 1.3 percent compared to the prior reports.

At the end of the reporting period there were an estimated 336,000 homes for sale, an increase of 17.5 percent in the inventory year-over-year.  This is an estimated 7.4-month supply at the current rate, almost a month more than was estimated for the September inventory.  Only 74,000 of the available homes were ready for occupancy.