Year-to-date sales are just 3.5% higher than in the same period last year.
The numbers: New-home sales ran at a seasonally adjusted annual rate of 553,000 in September, the Commerce Department said Wednesday.
Sales of newly-constructed homes swooned to the lowest since December 2016. September’s selling pace of 553,000 was 5.5% lower than in August, and 13.2% lower than a year ago.
What happened: Sales badly missed the MarketWatch consensus forecast of a 620,000 pace, and revisions to prior months were all downward.
The median selling price in September was $320,000, 3.5% lower than a year ago. At the current pace of sales, it would take 7.1 months to exhaust available supply, a 6-year high.
Big picture: The government’s reports on residential construction are based on small samples and often revised heavily, making it unwise to rely on data from any single month for the big picture. But the story so far in 2018 has been one of continuing deterioration. For the year to date, sales are just 3.5% higher than in the same period last year, a measurement that’s been falling steadily throughout the year.
For years, the housing story has been about strong demand, and limited supply. That dynamic may be starting to shift, however, as unrelenting price gains, higher mortgage rates, and scant choices may be nudging would-be homebuyers out of the market.
Inventory in the market for previously-owned homes has been inching up and sales declining.
What they’re saying: Analysts reacted to the Commerce Department release on Wednesday with surprise.
But the BTIG/HomeSphere September survey, conducted by a team of analysts led by Carl Reichardt, Jr., and released about a week before the government report, found that conditions for respondents “deteriorated markedly” this month. About one-third of survey respondents — small and mid-sized builders across the country — said sales were worse than they had expected. Some 22% said sales rates were lower than in September 2017, more than the 15% who reported lower sales than year-ago levels in August.
“The September drop likely is due in part to Hurricane Michael, which the consensus seems to have ignored, even though it clearly hit the existing home sales numbers reported last week” said Ian Shepherdson, chief economist for Pantheon Macro. “We expect a clear rebound in October and then a spike in November, following August’s brief jump in mortgage applications. But the bigger picture is one of a market under pressure from rising rates and the beginnings of a cyclical tightening in lending standards.”
Market reaction: Stocks began dropping soon after the new-home sales release, with the Dow Jones Industrial Average DJIA, -2.41% down by over 100 points. Home builder shares also turned lower, with shares of the iShares U.S. Home Construction ETF ITB, -2.82% in negative territory.