New home sales trending downward
Sales of new single-family homes slipped 5.5 percent in September from volumes reported for August, according to data from HUD and the Census Bureau. Year-over-year prices also dropped, with the median new home price reported to be $320,000 in September, down nearly 3.5 percent from the year-ago figure of $331,500.
Seasonally adjusted figures show 553,000 contracts for new single-family homes, declining from a downwardly revised total of 585,000 for August. September's estimate was the lowest annual rate since December 2016.
Robert Dietz, chief economist at the National Association of Home Builders (NAHB) pointed to eroding affordability conditions as a factor in the reduced volume.
Commenting on the latest figures, Dietz said the estimate marks "a notable retreat from the recent, modest growth trend that had been in place due to solid economic conditions and unmet demographic demand." He also noted rising construction costs due to labor access issues, building material pricing and rising regulatory costs constrained activity.
A comparison of sales by regions shows gains in the Midwest (up 9.7%), the south (up 4.4%), and the West (up 3.9%), but a sharp drop in the Northeast (down 16.5%), which NAHB attributes to tax reform-related effects and affordability concerns. For the newly-built component, only the Midwest registered a gain in sales.
"Home price gains and rising interest rates are slowing down the housing market, particularly in high-cost areas and among entry-level buyers who are sensitive to price increases," said Dietz. He suggested builders will need to provide homes at different price points to address affordability concerns.
The homebuilders' association said the drop in monthly sales volume elevated the months' supply number to 7.1, the highest since summer 2011. September's inventory increased to 327,000 single-family homes for sale, up from the August figure of 318,000.
"Despite the softer summer and early fall numbers, total sales for the first nine months of 2018 (485,000) are 3.5 percent higher than the comparable total for 2017 (469,000)," Dietz noted, adding, "Nonetheless, mirroring declining sales volume for the resale market, higher interest rates, storm disruption effects, and spring and summer hikes in lumber prices have taken a roll on the nation's building markets, even as macroeconomic conditions remain positive."
NAHB officials said managing rising construction costs going forward will be a key challenge for housing affordability as input costs increase, "although recent declines in lumber prices should help."