According to a report by Redfin, sales of new homes in all four major U.S. regions dropped in the last two months of 2018, with Northeast recording the sharpest decline at 16.1 percent in December, on a year-over-year basis. Northeast has been in the negative territory for the longest period compared to the other three major regions, experiencing no growth since January 2017, the report found.
"All around the country homebuyers were backing off at the end of last year due to high prices and high mortgage interest rates, and 2018 tax reform made it even more expensive to buy high-priced homes in high-tax states like Massachusetts, Connecticut, and New York. New homes tend to be pricier than existing homes, which is one reason sales of new homes dropped off so much in the Northeast," said Daryl Fairweather, Chief Economist at Redfin.
The annual drop in single-family new home sales on a seasonally adjusted basis in the last two months of 2018, revealed a -2 percent, and -13.4 percent decline in November and December respectively. Nationally, a decline of -4.6 percent in November, and -11.6 percent in the subsequent month was recorded in new home sales.
However, the sale of new homes is projected to pick up in the coming months. To some extent, the recent decline in mortgage rates and continued job growth has helped raise builder confidence up by two points to 58 this month, the report found. Another factor that could possibly drive an increase in home sales is the decline in building material costs, which is down by 1.8 percent in December.
The U.S. Department of Housing and Urban Development, in conjunction with the Census, typically reports monthly data on new-home sales. However, the data for 2018 had not been released on account of the partial shutdown. Redfin released its November and December 2018 numbers on single-family new-home sales in an attempt to bridge the gap in data during the longest shutdown in the history of U.S., which ended on January 21 with President Trump’s announcement.
Other data highlights from the report for Q4 2018 revealed that the median sale price for new homes in Q4 2018 was $371,200, remaining unchanged from the same period in 2017. Existing homes, however, which had a median sale price of $287,000, went up by 3.1 percent compared to the previous year. Supply of new homes recorded an increase by 7.4 percent annually while the supply of existing homes was up by 5 percent. The typical new home was on the market for 91 days, five days less than the previous year. On the other hand, existing homes spent a median of 43 days on market, two days less than the year before, according to the report.