New home sales rise in October, but outlook remains cautious

New single-family home sales rose in October, up 7.5% to a seasonally adjusted 632,000 year-on-year from 588,000 in September. The October gain was the third increase in the past eleven months, bringing sales down 5.8 percent year-over-year and down 39.0 percent from August 2020’s post-crisis peak. October sales remain below the 50-year average (see first chart).

In October, sales of new single-family homes rose in two of the four regions. Sales in the Northeast, the smallest region by volume, grew 45.7%, while sales in the South, the largest region by volume, grew 16.0%. However, sales in the Midwest fell 34.2% for the month and 0.8% in the West.

Over the past 12 months, sales have declined in three of the four regions, primarily by 26.5% in the Midwest, followed by 22.8% in the West and 0.3% in the South. The Northeast region is showing a 59.4 percent growth compared to October 2021.

The median selling price of a new single-family home was $493,000 (see second chart), up from $455,700 in September (not seasonally adjusted), bringing the 12-month average price to a record high of $445,000 (see chart 2). . second graph). Meanwhile, 30-year fixed-rate mortgages stood at 6.61% at the end of November, up from 7.08% in mid-November, but rose sharply from a low of 2.65% in January 2021. The combination of high prices and higher mortgage rates is reducing affordability and squeezing buyers out of the market.

The total stock of new single-family homes for sale rose 1.5 percent to 470,000 in October, the highest since February 2008. So monthly supply (inventory times 12 divided by annual sales) is 8.9, down 5.3 percent from September. but 29.0% higher than last year. Stocks and monthly supply remain very high compared to previous periods (see third chart). High prices, higher inventories and higher mortgage rates should continue to weigh on housing market activity in the coming months and quarters. However, the average time a new home was on the market in October remained very low at 1.6 months versus 1.5 months in September.

Meanwhile, the National Home Builders Association Housing Market Index, which reflects builder sentiment, fell again in November to 33 from 38 in October. This is the eleventh consecutive drop and the fourth consecutive month below the neutral threshold of 50. The index has fallen sharply from recent highs of 84 in December 2021 and 90 in November 2020 (see chart four).

All three components of the housing market index fell again in November. The expected single family sales index fell to 31 from 35 the previous month, the current single family sales index fell to 39 from 45 in October, and the potential buyer traffic index fell again to 20 from 25 the previous month. month (see fourth chart).

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 after over 25 years of economic and financial market research on Wall Street. Bob previously led the Global Equity Strategy division of Brown Brothers Harriman, where he developed an equity investment strategy that combines top-down macro analysis with bottom-up fundamentals.

Prior to joining BBH, Bob was Senior Equity Strategist at State Street Global Markets, Senior Economic Strategist at Prudential Equity Group, and Senior Economist and Financial Markets Analyst at Citicorp Investment Services. Bob holds an MA in Economics from Fordham University and a BA in Business from Lehigh University.

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