New home sales reversed course in August, according to the new report from the Census Bureau and the Department of Housing and Urban Development.
Sales of new single-family houses increased 3.5% to 629,000 in August, up from July’s 608,000 and 12.7% above sales made in August last year.
TIAA Bank Executive Vice President John Pataky said the “middling” report continues what has been a sideways year for new home sales and echoes last week’s mediocre existing market report.
“While price growth hasn’t been as sharp for new homes compared with the broader market, supply remains a challenge and rates continue to rise,” Pataky said.
“To break out of this holding pattern, supply will have to rise significantly to meet demand,” Pataky continued. “Otherwise, buyers who pictured themselves in a new home will move to the existing home market or else sit out entirely.”
The median sales price of new homes sold decreased to $320,200, and the average sales price was $388,400.
Zillow Senior Economist Aaron Terrazas said it’s a sign of the times that what might normally be seen as lackluster new home sales is likely to be warmly received.
The seasonally adjusted estimate of new homes for sale by the end of the month increased to 318,000 in August, representing a supply of 6.1 months at the current sales rate.
“August represents the second-lowest sales level since October of last year, continuing what has been a very sluggish 2018 on net,” Terrazas said. “Home sellers have been firmly in the driver’s seat of the housing market for the past three years, buoyed by strong demand and tight supply.”
“Historically in the face of rising prices, home builders have been quick to ramp up the pace of new construction to meet this demand – but their response has been notably more muted this recovery.”
However, Terrazas said the winds in the housing market have ever-so-slightly begun to shift and home builders may have been the first to pick up on these changes.
Although construction prices are on the rise, ongoing housing demand from victims affected by Hurricane Florence may cause an uptick.
“We should see a spurt of home building in the fall as the recovery gets underway, but we would have to see a very large jump in new home construction beyond the Southeast to avoid posting year-over-year declines in new home sales.”
For now, Terrazas said the housing market closes the summer on a disappointing note.
