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New-home sales stumble in October

New-home sales hit a more than two-year low in October, falling steeply across most regions, according to the U.S. Census Bureau.

Sales were on an annual pace of 544,000, the slowest rate since March 2016 (536,000) and just slightly ahead of the December 2016 pace of 548,000, the agency reported.

housestarts(1)October’s reading was down 9 percent, compared to September, and ran nearly 12 percent below the October 2017 pace.

Sales of new homes have fallen from a peak of 712,000 in November 2017, according to Census data.

On annual basis, sales were down 56 percent in the Northeast; 17 percent in the Midwest; 12 percent in the South; and 1.3 percent in the West.

Sales also fell across all regions compared to September.

One caveat about the new-sales numbers is that the monthly reading is subject to a wide margin of error, especially the regional figures.

September’s national reading, for example, was revised upward to an annual rate of 597,000, an increase from the original projection of 553,000.

The monthly drop for October isn't surprising, however. Builders surveyed by the National Association of Builders this month reported significantly less buyer traffic, and overall builder confidence fell sharply.

Despite the slowdown, some housing experts are optimistic that sales will rebound. One notable market development is that the price of new homes has been falling, indicating a shift to townhouse developments and other lower-cost housing. In October, the median new-home price was $309,700, down from a recent high of $343,400 in November 2017.

Also, the inventory of new homes has increased to 7.4 months of supply, according to the U.S. Census Bureau. The estimated supply of new homes dipped below five months in November 2017 seasonally adjusted. 

“The hurricanes in the South and wildfires in the West likely impacted [the new-home sales numbers in September and October], and continue to cloud the picture of the housing market’s overall strength,” said Mike Fratantoni, chief economist for the Mortgage Bankers Association. “The strong job market and rising wages should continue to support housing demand, but the lack of affordability has been a major constraint this year. The increase in supply on the market will be a positive as we move into 2019.”


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